Just like the pivotal scene in The Pursuit of Happyness where Will Smith’s character faces the harsh realities of financial responsibility, I too learned the hard way about taxes. The first time I owed taxes, it wasn’t even a huge amount—but at that moment in my life, I needed money for rent and food, and paying taxes felt like the last thing I could afford.

Growing up, my parents were never in tax trouble, so I never learned from them about tax savings, reducing taxable income, or what to do if I found myself in a financial bind. All I knew was that the tax authorities were intimidating, and the thought of an audit terrified me. What I didn’t realize was that late payments could lead to fees upon fees—penalties that could spiral out of control. These penalties exist because people long before us found creative ways to avoid their tax responsibilities, and now the rest of us must bear the consequences of a strict system.

Do You Need to File Taxes?

Tax season in the U.S. runs from January to April each year, and the 2025 deadline to file is April 15. If you earned money in 2024, you may need to file a tax return. Taxes fund essential services like roads, schools, public safety, and healthcare.

Here’s when you need to file:

• If you earned more than $14,600 in wages in 2024, you must file.
• If you made more than $400 as an independent contractor (Lyft, Instacart, freelance work), you must file.
• Even if you earned less, you may want to file to get a tax refund if money was withheld from your paycheck.

Understanding Common Tax Forms

When you start working, you’ll deal with several tax forms. Here’s a quick breakdown:

• W-2: Your employer sends this at the beginning of the year to show how much you made and how much was withheld for taxes.
• W-4: You fill this out when starting a job to tell your employer how much to withhold from your paycheck.
• W-9: If you’re an independent contractor, you provide this to companies that pay you.
• 1099-NEC: If you earned more than $600 in freelance or contract work, you’ll receive this form instead of a W-2.

The Consequences of Not Paying Taxes

When I was younger, I didn’t fully grasp how tax penalties worked. If you owe taxes and don’t pay on time, you could face:

• Failure-to-pay penalties: 0.5% of your unpaid taxes per month (up to 25%).
• Failure-to-file penalties: 5% of your unpaid taxes per month (up to 25%).
• Interest on unpaid taxes: This adds up fast, making the total amount even harder to pay.

These penalties can snowball, turning what was once a manageable tax bill into a financial nightmare. The tax authorities are not always fair, and they won’t hesitate to garnish wages or freeze bank accounts if they don’t get their money.

How to Avoid Tax Trouble

1. Understand Your Tax Obligations
   • Keep track of your earnings.
   • Know the tax brackets and deductions available.
2. File on Time
   • Even if you can’t pay everything, file anyway. The failure-to-file penalty is worse than the failure-to-pay penalty.
3. Explore Tax Credits & Deductions
   • Student loan interest, education credits, and earned income tax credits can lower your taxable income.
4. Seek Professional Help
   • If you owe money or don’t understand your tax situation, talk to a CPA or tax attorney.
   • Free tax help is available through the IRS, United Way, and many public libraries.

The Bottom Line

No one enjoys paying taxes, but we do enjoy the benefits they provide—safe roads, food safety regulations, education, and emergency services. Paying your fair share is part of being a responsible adult. If you ever find yourself owing taxes or needing advice, don’t panic. There are experts who can help you navigate the system and make the best financial decisions for your future.

Stay ahead of your taxes, and don’t let penalties and interest pile up like I once did. Learn from my mistakes so you can focus on building your financial future with confidence.