How to Help Young Adults File Taxes

[This is a guest post contributed by Jessica Chung, Programs Director at FitMoney]

Millions of Americans will file their taxes this spring, but for many, they’ll be first-time filers. As
parents, teachers and caregivers for young adults, we want to be sure that our children are
financially savvy and secure, but these new taxpayers likely haven’t received the proper
financial education needed to successfully file. Currently, only half of the states in the U.S.
mandate any financial literacy before graduation, and many students will file for the first time
before they’re even handed a diploma.

That’s why FitMoney is committed to providing free, unbiased financial literacy education and
opportunities for every student and family – no matter how or when they prefer to learn.
Financial skills are lifelong skills, so let’s learn them before they’re needed.

Filing taxes can be really confusing, especially for those filing for the first time. With the help of
FitMoney’s Taxes Badge program, we’re helping young adults become not only confident filers,
but conscious adults understanding where their taxes are going and why they’re filing in the first
place.

Today, we’re sharing how we cover taxes from their perspective and why it’s so important for
young adults to become financially literate (and how you can help them!). After all, financial
literacy journeys can begin right at home.

Start with the Basics

Filing for the first time can be an intimidating process, especially without confidence in the how,
why and when of filing. You may be surprised by what your student already knows, but it’s likely
many mysteries still remain behind where taxes are going and how you file them correctly. Start
with a discussion of what students already know. They may have learned a bit in school, online
or via their social media feeds. It’s important to begin by making sure their existing knowledge is
correct and up-to-date.

Taxes are a way for the government to ensure they’re collecting the right amount from working
individuals and businesses. When you file, you’re reporting income for the year and any
deductions you may be taking to communicate with the government. Not filing could result in
serious penalties, and it’s important that you’re reporting everything accurately and correctly.

Filing also helps you receive tax refunds if you have overpaid during the year. Even smaller,
first-time paychecks could receive a refund and have money to be claimed. Think of tax season
as an opportunity to take note of your financial goals and how you’ve been working toward
them. Big or small, tax season leads every one of us toward reflecting on our own financial
choices.

Understanding Before Filing

Knowing where to start is often the hardest part. Reading and understanding our first paycheck
can be confusing enough, let alone adding them together and understanding what to do with
them!

Your paycheck lays out gross pay, taxes deducted from income, and the take-home pay you’ll
receive in cash, check, or direct deposit. Gross pay is your regular wages and any additional
pay such as overtime. It will also include mandatory and optional deductions taken directly
before your take-home pay. These include retirement savings, other contributions, taxes from
the government, and more. Find a paycheck or pay stub and walk through it together. What
terms do they need a refresher on? What items and components do they already understand?
For example, more income doesn’t always mean a higher tax rate. It just means only income over that amount will be taxed higher.

Should you be looking for W-2s or 1099s in the mail every January? For many adults today, it
may be both! Your paycheck can often explain what forms you’ll be receiving. If you’re receiving
pay stubs from an employer, you’ll be looking for a W-2 from them. If you’re a freelancer, you
can expect to receive a 1099.

It’s especially important for freelancers to hold on to their pay stubs and invoices to keep track of
what they owe. If you’re not paying taxes through deductions during the year, you’ll still owe
them when the tax deadline comes up.

In FitMoney’s Taxes Badge program, we cover the differences between these forms, how tax
brackets work, how income can have multiple tax rates, and more. It can be a lot to learn and
definitely a bit overwhelming, so we always encourage positive conversation and asking
questions. Don’t be surprised if learning about taxes leads to more questions than answers. It’s
not an easy topic to understand and looks different for everyone, but getting started is all of our
first steps.

Finally, think about strategies for making next years’ taxes easier. Where are paychecks being
kept? Should you adjust any withholdings? You’ll definitely thank yourself in a year by making
decisions today.

How Do We Actually File?

Staying on top of your taxes and deadlines means knowing when and how to file. Some
taxpayers will pay throughout the year, and others will pay annually every tax season. How and
when you pay depends on factors like your job, income, where you live, and so on. If you’re a parent,
caregiver, or educator, discuss your own experiences filing over the years. Many Americans file
online, work with an accountant, or have another method. By clarifying the mystery behind how
we pay, you can help them make their own confident decisions regarding what’s best for them.

Government websites or tax professionals are great resources for guidance on navigating the
process. FitMoney’s Taxes Badge also covers the different ways to file and how to meet the
deadlines associated with that method.

All in all, there’s a reason tax season can be stressful. Just be sure to do your research, follow
trusted sources, and write those deadlines in your calendar!

There’s a lot to learn when it comes to filing taxes. The best thing you can do is be there to help
answer questions, research reliable sources for new information, and encourage them to ask for
help when needed. It only takes an hour to build just a little more confidence in filing and not be
intimidated when that tax deadline comes around. Filing taxes is something we’ll do for the rest
of our lives, so let’s take the stress out of it by working together.