Filing your first tax return is a bit like doing your laundry.
You don’t want to do it. You’d prefer someone just did it for you. But if you don’t do it, you know there will be consequences.
Unlike laundry, you’ll need to do a bit more sorting, as in sorting through of all those tax forms. And unlike laundry, you really should know the basics before you start. Don’t worry though: you’ll get through it and probably even get a refund afterwards.
Find out if you are being claimed as a dependent!
The first thing you should do is talk to your parents. Since they’ve been claiming you as a dependent since before you could even utter the words, ‘tax return’, make sure they know you are planning on filing for yourself to avoid being rejected by the IRS. Each and every person is allowed to claim a personal exemption for themselves or their dependent. However, only one exemption can be claimed per person.
Here’s a classic scenario:
Abby was just hired as a barista at that awesome new cafe downtown. She makes a decent income and her co-worker mentions that she could probably cash in on a nice refund come tax time. Being that Abby is only 17 and earning less than the threshold allotted by the IRS, her parents can still claim her as a dependent on their return. If Abby files a tax return and claims the personal exemption for herself, not noting that she is being claimed as a dependent, and then her parents claim the personal exemption for Abby on their return, the IRS will reject the last tax return submitted.
Do you know the age requirements to be claimed as a dependent?
Although your age doesn’t specifically determine if you need to file a tax return, it is a key player in whether or not you can be claimed as a dependent on someone else’s taxes. When it comes to age, you can only be claimed as a qualifying child dependent if one of the following is true: (more…)