Filing Your First Tax Return: A Teen's Guide

The "Boss Battle" of financial literacy — filing real taxes

Why Filing Taxes Matters

Filing your first tax return is a rite of passage. And here's the good news:

Most teens owe little or no federal income tax — but you should file anyway.

Why file even if you don't owe?

Get any withheld taxes refunded
Create a tax filing history
Practice for when it matters more
Required if you have self-employment income over $400

Do You Need to File?

If You're an Employee (W-2 Income)

Filing Status	Gross Income Threshold (2024)
Single, under 65	$14,600
Can be claimed as dependent, unearned income	$1,300+
Can be claimed as dependent, earned income	$14,600

Translation: If you earned less than ~$14,600 from a job AND your parents claim you as a dependent, you technically don't HAVE to file federally.

But you probably should — to get withheld taxes refunded.

If You're Self-Employed (1099/NIL Income)

Self-Employment Income	Do You Need to File?
Under $400	No (for self-employment tax)
$400 or more	Yes — must file and pay self-employment tax

Important for athletes: NIL income is usually self-employment income. If you earned $400+ from NIL, you must file.

Key Tax Concepts for Teens

The Standard Deduction

The government doesn't tax your first ~$14,600 (2024) of income. This is the standard deduction.

Your Earned Income	Taxable Income (after standard deduction)
$5,000	$0
$10,000	$0
$14,600	$0
$20,000	$5,400

For most working teens: Standard deduction > total income = $0 federal tax owed.

Tax Withholding

When you work as an employee, your employer withholds taxes from each paycheck:

Federal income tax
State income tax (in most states)
Social Security (6.2%)
Medicare (1.45%)

The issue: If you don't owe federal tax but had it withheld, you need to file to get it back.

Self-Employment Tax

If you're self-employed (babysitter, lawn care, NIL income), you pay:

12.4% Social Security tax
2.9% Medicare tax
Total: 15.3% on net profit

Wait, employees only pay 7.65%! That's because employers pay the other half. When you're self-employed, you pay both halves.

The silver lining: You can deduct half of self-employment tax from your income.

What You'll Need to File

Documents to Gather

Document	What It Is	Where to Get It
W-2	Wage and tax statement from employer	Mailed by Jan 31 or available online
1099-NEC	Non-employee compensation (contractor/NIL)	Mailed by Jan 31 or available online
1099-INT	Interest income (if bank paid $10+)	From your bank
Social Security Number	Your SSN	You should know this
Bank account info	For direct deposit of refund	Account and routing number

If Your Parents Claim You

You'll need to know:

That they ARE claiming you (check first!)
Their filing status doesn't matter for YOUR return

Filing Options for Teens

Free Filing Options

Option	Who It's For	Notes
IRS Free File	Income under $79,000	Free guided software from IRS partners
Cash App Taxes	Any income level	Completely free, mobile-friendly
MyFreeTaxes (United Way)	Income under $79,000	Free, volunteer-supported
VITA	Low income	Free in-person help, check IRS.gov for locations

Paid Options (Usually Unnecessary for Teens)

TurboTax, H&R Block, etc. charge fees. For simple teen returns, free options work fine.

Step-by-Step: Filing a Simple Return

Step 1: Gather Documents

Get all W-2s and 1099s. Wait until mid-February to ensure you have everything.

Step 2: Choose a Filing Method

For most teens: IRS Free File or Cash App Taxes.

Step 3: Enter Personal Information

Name, address, SSN
Filing status (probably "Single")
Check "Someone can claim you as a dependent" (if your parents do)

Step 4: Enter Income

W-2 wages
1099 income
Interest (1099-INT)
Any other income

Step 5: Enter Deductions

Most teens take the standard deduction. Unless you have significant itemized deductions (mortgage interest, large charitable donations), standard is better.

Step 6: Review and Submit

Double-check all numbers
E-file (faster refund, confirmation of receipt)
Set up direct deposit for refund

Step 7: Save Everything

Keep copies of:

Your submitted return
All W-2s and 1099s
Any supporting documents

Keep for at least 3 years (IRS can audit up to 3 years back, 6 for significant errors).

Self-Employment Tax: The NIL Reality

If you earned NIL income, you're a sole proprietor (even if you didn't set up a business).

What You File

Form	Purpose
Schedule C	Report business income and expenses
Schedule SE	Calculate self-employment tax
Form 1040	Your main tax return

Deductible Business Expenses

These reduce your taxable profit:

Expense	Examples
Equipment	Camera, ring light, computer for content
Professional services	Agent fees, legal advice
Marketing	Website, business cards
Education	Courses directly related to your NIL business
Travel	Mileage to appearances (at IRS rate)

Keep receipts! No documentation = no deduction if audited.

Estimated Taxes

If you expect to owe $1,000+ in taxes (common with significant NIL income), you should pay quarterly estimated taxes:

Quarter	Due Date
Q1	April 15
Q2	June 15
Q3	September 15
Q4	January 15 (following year)

Why bother? Avoid underpayment penalties. The IRS expects taxes paid throughout the year, not just at filing.

What ISP Teaches

The Tax Filing "Boss Battle"

This is one of ISP's signature Financial Skill Tree challenges:

Gather — Collect all tax documents (W-2s, 1099s)
Learn — Understand the basics (standard deduction, withholding)
File — Complete and submit a real tax return
Review — Understand your refund or amount owed
Teach — Create a "You Teach" video explaining what you learned

Why It's a "Boss Battle"

This isn't a worksheet. It's a real skill that most adults struggle with. Completing it earns:

📋 Tax Pro Badge on your MyPath profile
Major OVR boost in the Financial Skill Tree
Unlocks the "credit card authorized user" challenge progression

The Sequence

First Job → File Tax Return → Build Credit → First Card

Each step unlocks the next. You can't build credit responsibly without understanding income and taxes.

Common Teen Tax Mistakes

Mistake	Why It's a Problem	What to Do Instead
Not filing when you had withholding	Money left on the table	File to get refund
Forgetting 1099 income	IRS knows about it (they got a copy)	Report all 1099s
Not keeping receipts	Can't prove deductions	Keep digital copies of everything
Waiting until April 14	Stress, errors	File in February/March
Ignoring state taxes	Penalties add up	File state return too
Not paying estimated taxes (self-employed)	Underpayment penalties	Pay quarterly if owing $1,000+

FAQ

Q: My employer withheld taxes but I don't owe any. Do I get that money back?

A: Yes — but only if you file. That's the whole point of filing when you don't technically have to.

Q: What if I made a mistake on my return?

A: File an amended return (Form 1040-X). The IRS would rather you correct it than ignore it.

Q: Can my parents file for me?

A: They can help, but the return is in YOUR name with YOUR signature. You're responsible for its accuracy.

Q: What if I got paid cash and didn't get a W-2 or 1099?

A: You're still required to report the income. Being paid cash doesn't make it tax-free.

Q: How do I know if I'm an employee or independent contractor?

A: Employees get W-2s, contractors get 1099s. If you control how/when you work and use your own equipment, you're likely a contractor. If the company controls your schedule and methods, you're likely an employee (regardless of what they call you).

State Taxes: Don't Forget

Most states also have income tax (Iowa included). You'll typically:

File a state return in addition to federal
Use similar free filing tools
State rules may differ from federal

No state income tax: Alaska, Florida, Nevada, New Hampshire (dividends/interest only), South Dakota, Tennessee, Texas, Washington, Wyoming.