Navigating Tax Filing for the First Time at 21: A Comprehensive Guide

As a 21-year-old, you may find yourself in a situation where you've never filed a tax return. While this can be daunting, it is not uncommon nor necessarily a bad thing – especially if you have earned income. It's time to start taking responsibility for your financial well-being by understanding and navigating the tax filing process. This guide will help you understand the importance of filing, where to start, and what to expect in the process.

Understanding the Consequences of Not Filing Taxes

It's important to recognize that if you have earned income but have never filed a tax return, you are missing out on potential tax credits and benefits that are available to you. Moreover, if the IRS has flagged you as not having filed, they have every right to expect that back taxes are owed. Ignoring this issue can lead to significant penalties and interest, which only increase the longer you delay.

The best course of action is to call the IRS. They can provide you with a detailed breakdown of how much back taxes you owe and what the consequences of not filing could be. Once you have this information, it is highly recommended that you seek professional help. Hiring a reputable tax preparation company to assist you in paying off your taxes is crucial to avoid additional fines and penalties.

Delaying this process further will only exacerbate your situation, as every second you wait only adds to the accruing fines and interest. Early action can significantly reduce the financial burden and prevent any legal issues.

Where to Start: Your First Steps in Filing a Tax Return

Now that you understand the importance of filing and the consequences of non-compliance, here are the steps you should take to get started:

Visit Your Local Public Library: Check if they have a copy of the IRS Publication 17. While it might put you to sleep, it's a valuable resource. Alternatively, sit there and read it for a comprehensive overview of the tax system and your responsibilities. Visit a Tax Preparation Service: Consider dropping by an office of a major tax preparation service like HR Block, Liberty Tax, or Jackson-Hewitt. These offices can provide you with professional guidance and will prepare your tax return for you. Alternatively, you can make an appointment with an Enrolled Agent who can offer personalized tax advice and preparation. Take a Tax Course: Many tax preparation firms offer courses that can provide you with a solid understanding of tax laws and the process of preparing your own return. This investment in knowledge can be incredibly useful and is guaranteed to educate you on the tax system.

Embarking on this path may seem intimidating, but with these resources and professional help, you can navigate the process effectively.

Handling Unresolved Income and Previous Years’ Filing

If you've started your career or have a side business, you will need to gather all relevant financial documentation and begin the process of filing. Here's what to consider:

Check for Income: Did you earn any income from a job or your own business? This is crucial information for your tax return. Income Verification: If you had a job or an interest-bearing checking account, you should have received end-of-year tax forms. If you haven't received these, contact the issuers for replacements. File for Past Years: For each year you have not filed, you will need to file a tax return. This is where a professional’s assistance can be invaluable to ensure you receive any refunds due to you, or are correctly assessed if you owe taxes.

It's also worth noting that if you are due any refunds, you can expect to receive them in 4–6 weeks, as long as you file your returns accurately and provide all necessary documentation. On the other hand, if you owe, the process will require you to develop a payment plan to avoid penalties and interest.

Conclusion

Starting to file your taxes for the first time, especially at 21, is a significant step in managing your financial responsibilities. Whether you are due refunds or owe taxes, it’s best to address this issue proactively. With the right guidance and resources, you can navigate this process effectively and confidently.