Taxes

Once you have a job or a savings account, you may need to file an income tax return. Remember that filing a tax return does not mean that you have to pay income taxes. When you are a low-income worker, filing a tax return can mean that you will get money back.

When you work, your employer subtracts an amount from each paycheck (called “tax withholdings”) and sends that money to the Internal Revenue Service (or IRS). The amount they withhold is an estimate based on IRS rules of the amount of taxes you will owe. The tax return that you file determines whether the estimate is correct. If too much money was withheld from your paycheck, then you will get a refund from the IRS by filing your annual tax return. If not enough money was withheld from your paycheck, you will need to pay the IRS or face serious penalties. You can get in trouble for failing to file an income tax return. Besides possibly getting a refund, you may earn extra money if you have children or the government provides some sort of economic impact or stimulus payment. Be sure to keep a copy of your income tax documents for your records because you may need it to prove your income for eligibility for public benefits, housing programs, financial aid, and more.

Your employer will also withhold Social Security taxes from your paycheck. This is a different type of tax and you won’t get a refund on this money. Social Security tax helps fund Social Security and Medicare programs, which provide benefits for older adults, people with disabilities, and children.

Federal tax returns are due by April 15th every year. Texas does not have a state income tax for individuals, so you do not have to file a state tax return if you lived and worked only in Texas during the past year.

By January 31st of each year, your employer will send you a Form W-2 by mail or email, or they may make it available electronically via a secure online portal. Any bank where you had an account should mail you a Form 1099. The Form W-2 from your employer will show how much they paid you and how much tax they withheld in the prior year. The Form 1099 from your bank will show how much interest your money earned. You will need these forms to complete your tax return. If you don’t receive a form from each of your employers and banks by the end of the first week of February, you should contact them. If you live with a family or lived with a family during the past year, you should discuss your income tax return with them because you need to understand how they will treat you on their tax return and whether they will claim you as a dependent.

You do not need to pay a business to prepare your taxes. Many local groups provide free tax return preparation assistance to low-income people in the early part of each year. Call 2-1-1 to find Volunteer Income Tax Assistance (VITA) sites near you or visit the VITA locator here. You will also likely qualify to electronically file your tax return for free. Ask the organization helping you or visit the IRS website. The IRS website also has other information about taxes. Don’t pay to have your tax return prepared!

For more information about saving money, see Managing Your Money and Banking.