Some Basics About Filing Taxes
Tax Filing 101
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There are 2 types of taxes that you have to file: Federal and State.
According to the IRS:
In most cases, you will need to file a return if any of the following are true:
- Your gross income was over $10,000 as a single filer (or over $20,000 as a married couple filing jointly)
- You earned over $400 from self-employment
- You sold your home during the tax year
- You owe taxes because of your retirement account, either from distributions or excess contributions
- You owe Social Security and Medicare taxes on tips that were not reported to your employer, or on wages that your employer did not withhold these taxes from
After you file taxes, you may get a bill from the IRS saying that you need to pay taxes or you may get a Refund (this is when the IRS gives you money back)
The best and easiest way to file taxes is through a cheap or free tax software service. There really is no need to pay someone to do your taxes unless you have a really complicated situation.
According to a Reddit user, “If your adjusted gross income (AGI) is $66,000 or less, https://www.irs.gov/freefile has many options which may allow you to e-file your federal and state income taxes for free using popular brand-name software like Turbo Tax, Tax Slayer, etc., even if you need the more “complicated” schedules for things like itemized deductions, self-employment income, or capital gains and losses. Note that the free products offered via this service may differ from the “free” (with pushy up selling) products you’d find if you went directly to the vendors’ web sites. Always follow the links from the IRS if you want the truly free versions.”
A few things to keep in mind:
- Your employer, your banks, your school- they will all send you various tax forms. As soon as you get them- keep them in a folder or in a specific place on your computer. Once you have all your forms you can begin the process. Software like Turbo Tax allows you to save your work so as soon as you get your W-2 or 1099 from your employer you can get to work.
- Discuss with your parents your “dependent” status. Only one person can claim you as a dependent- either your parents or you- but not both. If you are still living at home or you’re parents are supporting you , they may still want to claim you as dependent. If this is not the case, let them know that they can no longer claim you as a dependent because you will be claiming yourself. This will ensure there are no issues if you are claimed as a dependent twice.
- File soon and file early. As soon as you can file you should do so. First of all, get it over with. Second, since many people wait until the last minute- the IRS usually takes while to process your return if you file near April 15th. However, if you file earlier (you can file as early as January 28th) they are more likely to process your return and give you a refund quickly.
- You MUST file by April 15th. Don’t wait until then. Do it earlier. But that is the latest you can file. Don’t miss the deadline please!
- If you are hit with a huge tax bill, then hire a professional to speak to. It is possible they can help you file an amended return if you did something wrong, or help you work out a payment plan with the IRS. Whatever you do, don’t not pay your bill! Even if you can’t afford it- work out some sort of plan. If you just run out on your bill you can be in a lifetime of trouble!
I personally have been using Turbo Tax to file my taxes for the past 8 years and I have been very happy. TurboTax is a software that you can purchase in-store or online that walks you through filing your taxes and then e-files for you, if you want. It’s easy, straightforward and it saves all your work. I also love that they save all your information from previous years so a lot of the information is already there the following years. It’s a great option that you can do from home- it’s quick and easy! You can request that your refund (if you are entitled to one) be directly deposited to your bank account which speeds up the processing time as well. I have always had very quick turn around times with my refund when doing through Turbo Tax, but I usually file my taxes in the first week of February. There are different forms of the software starting from free for basic returns and getting more expensive as you get more complicated. The website can help you figure out the best program to purchase.
DO NOT get your refund in Amazon gift cards (this is sometimes an option). It’s just begging for you to spend your refund instead of using to pay down debt, bulk up savings or use it for more crucial purchases. It may seem like a good deal (sometimes there is a financial incentive) but getting gift cards instead of cash is RARELY a good idea. Be smart with your refund and let the money help you become a little more financially secure.