Pro Tips: How To Do Your Taxes
If you want to pull the ultimate adult move, learn how to deal with taxes on your own. There’s nothing more grown-up than saying, “no, Mom and Dad, I don’t need you to file my taxes for me. I got ‘dis.” Except for that awkward moment where filing your taxes is actually a wicked daunting task. But don’t worry, guys, because we’ve got your back: Figure out if you’re going to do it by hand or with a tax software.
And when it comes to this one, we really, really suggest using a tax software. While as youngins, we don’t have too many complications with your taxes (IE joint filing, dependents, or real estate), it’s just worth the investment to be guaranteed doing it the right way. There are two major downsides to messing up your taxes: You lose out on money, or you get in trouble with the feds.
If you do choose to learn how to file your taxes by hand, we highly suggest asking a parent or a friend who’s a legitimate accountant (not just an accounting major) to walk you through it the first few times. Like we said, taxes are a real government deal, and you need to make sure they’re done correctly.
If you took our advice and decided to go with a tax filing software, you’re still going to need to do a little bit of work. Most of what you’ve got to do is making sure you have all of the federal documents that get mailed to you starting around January in one place. We suggest getting a file folder to store all of this in and label it “[Your Name] 2015 Taxes.”
There are a few other things that you should hang onto to keep organized, like pay stubs, receipts from charitable donations, and information regarding student loan payments.
Know your stuff.
Even if you use a tax software or have someone else help you file your taxes, there a few basic things you definitely should know:
Withholding Allowances: When you start working, you usually have to fill out a W-2 or W-4 form. On here, you do things like claim dependents and your withholding allowances. For the purposes of this article, we’re going to assume you are claiming no dependents. However, withholding allowances are really important. Withholding allowances are basically the amount of money your employer takes away from your paycheck and pays the IRS for you. Some people file big withholding taxes, and at the end of tax season, get some of it back because they paid the government more than they owed. Some people file fewer, and get less back at the end of tax season. It’s sort of a personal preference which you choose, but if you’re getting mad money back at the end of tax season, you might consider adjusting your withholding so you can throw that cash at something useful (like rent).
Tax brackets: Some of you might know that we pay taxes on a graduated tax bracket. This means that those who make less per annum income pay a smaller percentage of taxes. This is because if we had a flat tax, a 30 percent taxation would hurt someone who makes 30K a year more than someone who makes 100K a year. Take a second to look up the tax bracket and check out where you are.
It’s also important to note marginal tax rates. It’s best if we explain this one with an example: If in 2015 you were single and making $35,000 per year, you’d be in the 15 percent tax bracket. However, that doesn’t mean that you pay 15 percent of your per annum income in taxes. Instead, you’d pay 10 percent of your first $9,226, and then 15 percent on the rest.
Become acquainted with tax exemptions.
The good old US of A doesn’t need all of your money. There are a few things that are exempt from taxes, like:
- Charitable donations
- Student loans
- Job search expenses
- State and local income taxes
There are a few other categories you can claim exemptions on (like home mortgage interests), but for the purposes of this article, we’re going to assume you don’t have that (yet).
Remember that these are just bare-bones basics of taxes. Like we said, we really suggest enlisting the help of an online accounting tool to help you get this stuff done. If you have the proper paperwork organized well, all you’ll need to do is input a few numbers, and voila, Uncle Sam owes you some cash money. Cha-ching!