“In this world nothing can be said to be certain, except death and taxes.” -Benjamin Franklin
That’s right. It’s everyone’s favorite time of year once again: Tax season. Whether you’re an old pro or just embarking on the fabulous venture into adulthood that is doing your own taxes, it’s easy to become confounded by this increasingly annoying practice in American citizenship.
But as our Founding Father said, taxes are inevitable. So instead of pulling out your hair or contemplating methods of torture for the IRS, let’s break it down together.
Key Terms
If you’re filing for the first time, you may not know what half the stuff is the IRS refers to on a tax form. Exemptions, AGI, Credits, deductions, taxable income and withholding are all words you will encounter along your tax journey but you may not know what they mean. Don’t worry, I’ve got you.
Via: Dylan Ratigan
Exemptions: an amount the IRS lets you subtract from your taxes; can include yourself, your spouse and/or your dependents
AGI: Adjusted Gross Income; this is all the money you’ve earned over the year minus certain things; it’s the first step to calculating your taxes
Credits: these can be applied to your taxes to directly affect the amount that you owe; ex. American Opportunity Credit gives you money back for school-related expenses
Deductions: these are things that are applied to your AGI in order to arrive at your taxable income; standard deduction is a fixed amount you can subtract from your income based on your tax bracket; itemized deduction is a detailed list of anything that can qualify for deductions, but it’s more time consuming and for people who make less money the standard deduction is better
Taxable Income: this is the final amount you use when calculating how much you owe in taxes after all the deductions and exemptions have been taken out
Withholding: this refers to the money that is taken out of your paycheck for taxes; the money is put into an IRS account to be used for your taxes and if it is more than you owe, you get a refund once your return is accepted
Okay, so now that you know what the IRS is actually talking about, let’s get into the good stuff.
Via: Crowe Horwath
Do You Have to File?
The first question that any good taxpaying citizen should ask themselves is, “Do I even have to file taxes?”
As 20-somethings, filing taxes with the IRS is somewhat of a gray area, believe it or not. There are a few things to consider when you’re determining whether you have to file.
First, you need to figure out if you’re going to file independently or if your parents are going to list you as a dependent. Technically, you can still be claimed as a dependent if you’re a full-time student under the age of 24, you live with your parents for more than half the year (exceptions may apply) and you cannot provide for more than half of your living expenses, according to Turbo Tax.
If you’re parents are claiming you as dependent, you’ll need to get with them to give them all your income information.
If you are going to file as an independent, you’re next step is to determine your filing status. If you’re not married, then you will file as a single person, which means that you are the only member of your household. (Quick note: in tax language, the term household doesn’t refer to your actual living area. So, if you have two roommates, they are not in your tax household. You are your own household.) If you are married or divorced, there are options for that as well.
If you’re still not sure, it’s better to file than not to file because if you do have to and you don’t, the IRS will hunt you down. And the potential for getting that beautiful tax refund just in time for your Spring Break debauchery is not so bad either.
What to File
The good news for us Floridians is that we are among the select few in this country without a statewide income tax, which means that the only taxes we potentially need to file are those to our dear Uncle Sam a.k.a the federal government. This is great because it makes your tax life a lot simpler.
Via: J.R. Helms & Associates, P.C.
Before you can begin your taxes though, you need to collect certain documents.
First, if you’re a student or you were a student during the last year, you’ll need to get your 1098-T from the university you attended in the year for which you are filing taxes. If you’ve attended multiple schools, you’ll have multiple documents, so be sure to get those together.
Next, if you’re employed, you’ll need your W-2. Employers are required by law to get you your W-2 by Jan. 31, so if you haven’t received it, then you need to contact them to get it. If you’ve been employed at all over the course of the year, you’ll need a W-2 from that particular job. This includes summer jobs, part-time jobs or temporary jobs. Many people who leave one job and start a new one over the course of the same year forget about the income they earned for their first job. You need to make sure you get your W-2 for every job you worked during the year.
If you have special cases of income (CDs, IRAs, interest from your bank, etc.) you’ll need to get additional documents as well. You can look at the IRS website for details on what documents you’ll need before you can file your taxes.
Via: Washington Street Journal
Now that you’ve collected all the documents, you will file your return. Personally, I recommend using a tax service to help you do this because you will be able to get the maximum refund possible and they make it really easy to plug in your information. H&R Block has free tax preparation for federal returns and there are places around campus that offer free tax consulting as well.
Regardless of whether you use a service or try to do it on your own, you need to figure out which tax document is the one you need to file. There are three possible forms you could file: 1040, 1040A or 1040EZ. Unless you’re some sort of millionaire while still in college, you’re most likely going to fill out the 1040EZ, which is good because it’s the easiest one to fill out.
Filling Out the Form
Once you have all your documents collected and the correct tax form to fill out, it is just a matter of using the right numbers in the right places. The good thing about the IRS is that because they want all their money, the tax form is fairly user-friendly. It will tell you which box to fill out if you meet certain conditions and where to look to find the specific numbers.
In addition, tax forms round up to the nearest dollar, which means you don’t have to worry about pesky decimal points screwing you up.
Via: Forbes
Filing
While the deadline to file your taxes is April 15, don’t wait until the last minute to file them. I know procrastination is ingrained in our DNA, but this is not one of those things you can wait to do until the morning of the due date while sipping on your latte. Get it done early. Pick a weekend soon, get on the phone with your parents and just do it. You’ll thank yourself later.
Another reason you should file early is because you’ll get your refund early. Yes, the beloved refund. Right up there with financial aid refunds, tax refunds are the most glorious ways to get free money from the government. They can fund your Spring Break hijinks; they can be saved for next year’s shenanigans; they can pay off your debts.
The bad news is if you claimed 0 on your W-4 at your job, you’re probably not getting a refund, or at least not a good one. Refunds only come when you’ve paid more than your share of taxes on your paychecks. So for future reference, on your W-4, just claim 1 because it will take the maximum amount of taxes out of your check. You won’t miss the money every time the check comes, but you will rejoice when your refund makes its way into your account.
Via: E-File
Other Tips
Know what credits and exemptions you can take. If you’re a dependent, unfortunately, you don’t get to claim any exemptions. But if you’re not, then start doing your research. There are tax exemptions and credits out there for you. Take advantage of them.
People tend to freak out about taxes because they don’t know how to do them properly. Newsflash: if you’re not an accountant, you’re not going to know everything about doing your taxes. So don’t freak out. Use Google. Use your parents. You will figure it out and you will be fine. Taxes are a part of life, but they’re not something to stress over.
Just get them done, get your refund and have a blast until next year’s tax season rolls around. Welcome to adulthood.
Via: Tax Policy Center
