Finance For Beginners: Taxes 101

Introduction 

Taxes. The word alone is enough to make most people’s eyes glaze over. One moment you’re figuring out what to do with your first paycheck, and the next, someone’s asking if you filed your 1040. If tax forms, deadlines, and confusing terms like “deductions vs. credits” make you feel like you’re stuck in a financial loop—you’re not alone.

This beginner-friendly guide will help you figure out what taxes are, who needs to file, what forms you actually need, and how to get through tax season with your sanity intact. No jargon. No judgment. Just real talk.

What Are Taxes and Why Do We Pay Them?

If we’re being honest, taxes feel like the government’s way of saying “congrats on earning money, now give us a piece.” But in truth, taxes keep the world spinning. From roads and schools to social programs and emergency services, your money helps make it all work. 

And yes, everyone pays in some form or another—so you’re not alone in side-eying your paycheck. Think of it as a giant group project where your money builds the stuff we all use. It’s not always pretty, but it’s necessary.

Who Needs to File Taxes in the U.S.?

Whether you’re a full-time employee, a college grad doing freelance work, or juggling multiple side hustles, chances are you need to file. Here’s the breakdown:

• W-2 employees: If you get this form from your employer, you’re required to file.
  
  

• 1099 workers/freelancers: If you made $400 or more, even from side gigs—yup, you’re in.
  
  

• Students: If you earned income and had taxes withheld, filing could get you a refund.
  
  

• Low income earners: You might not have to file, but doing so could still score you credits or refunds.
  
  

Types of Taxes You Might Deal With

Taxes aren’t one-size-fits-all. You may come across:

• Federal income tax: The big one. Everyone pays this based on earnings.
  
  

• State income tax: Not all states have it, but where they do, it’s layered on top.
  
  

• Self-employment tax: If you’re your own boss, this covers Social Security and Medicare.
  
  

• Sales tax: Tacked onto purchases in most states.
  
  

• Property tax: Homeowners pay this annually to their local government.
  
  

• Capital gains tax: Earned money from selling stocks or crypto? The IRS might want a cut.
  
  

Tax Forms Explained: W-2 vs 1099 and More

No, you don’t need a translator—just this cheat sheet:

• W-2: Given to employees. It summarizes how much you made and how much was withheld.
  
  

• 1099-NEC: For freelancers or contractors. No taxes withheld—you’re responsible.
  
  

• 1040: The main form you use to file your taxes.
  
  

• W-4: You fill this when you start a job. It tells your employer how much to withhold.
  
  

• 1098-T: If you’re a student, this helps with education tax credits.
  
  

Pro tip: Keep digital or physical folders with all your forms in one place. It’ll save your sanity in April.

What’s The Difference Between Tax Deductions and Credits?

• Deductions reduce your taxable income. Think of it like trimming the amount you’ll be taxed on.
  
  

  • Example: You donated to charity or paid student loan interest.
    
    

• Credits reduce the amount of tax you owe—straight up.
  
  

  • Example: The Child Tax Credit knocks money right off your tax bill.
    
    

How to File Your Taxes 

Filing your taxes is easy once you have the right information. You can do that by:

• Using Online tools: TurboTax, FreeTaxUSA, IRS Free File (great for beginners)
  
  

• Hiring a pro: Worth it if your situation is messy (multiple incomes, dependents, etc.)
  
  

• Manual filing: Possible, but why torture yourself?
  
  

• Organizing documents early: W-2s, 1099s, receipts, student loan statements, etc. Being prepared makes filing easier (and faster).

Important Tax Deadlines and What Happens If You Miss Them

April 15, 2025 was the official deadline to file your federal tax return and pay any owed taxes.

But missed it? Don’t panic—you’re not alone.

Here’s what you can do:

• File ASAP to minimize penalties and interest.
  
  

• Haven’t filed at all? You can still file now. In fact, the sooner you do, the smaller your late fees.
  
  

• Need more time? If you filed an extension before April 15, your new deadline is October 15, 2025—but you still had to pay estimated taxes by April 15.
  
  

• Expecting a refund? Good news: there’s no penalty for filing late if the IRS owes you money. But don’t wait too long—you’ve got a 3-year window.
  
  

What Happens After You File Your Taxes?

• Refund? Sweet. You can track it using Where’s My Refund.
  
  

• Owe money? You can pay in full or request a payment plan.
  
  

• Audit? Rare, but possible. If you’re honest and organized, it’s usually chill.
  
  

⚠️ The IRS doesn’t slide into your DMs. If someone calls or emails asking for your Social Security number, it’s a scam.

Conclusion

Taxes aren’t fun, but they’re not monsters under the bed either. With the right tools and a little confidence, you can file, breathe, and move on. Don’t forget to check out our other beginner-friendly guides on budgeting, emergency funds, and credit scores for a full financial glow-up.

Need more help? Visit IRS.gov for free resources or get matched with a certified tax pro.

Frequently Asked Questions

1. Do I have to file taxes if I’m a student?

If you earned income or had taxes withheld from a paycheck, you might get money back by filing—so it’s worth checking.

2. What happens if I file taxes late?

You'll likely face penalties and interest. File ASAP or request an extension before April 15.

3. Can I file taxes for free?

Yes! Tools like IRS Free File or FreeTaxUSA help eligible filers file without paying a dime.