Question: I’ve learned a lot in school over the years, but there are basic things about adulthood that I’ve never really learned much about. Graduation is looming for me, and I’ve realized that I don’t really know how to file my taxes. In fact, I’m worried that I should have been filing taxes every year I’ve been in college. When I look things up online, I mostly just find pitches from tax software companies and other information that’s specific to certain tax programs and apps. Can the experts give me a brief crash course in tax filing?
Answer: Taxes are all around us: we’re taxed on our purchases, for instance, and taxes come out of our paychecks. And, of course, we’re supposed to file taxes at the end of the year–the deadline is traditionally around April 15, though it can vary slightly year to year.
What’s in that tax filing? Well, say the Long Island tax attorneys at Tax Problem Law Center, it’s essentially an accounting of how much money you made this year and how you made it, plus some math determining how much money you owe. You’ll explain what you made and how, because not all sorts of income are taxed at the same rate. You’ll also have a chance to take deductions, which are subtracted from your total taxable income (not from your final tax bill–just from the income total used to calculate that bill). For instance, if you work from home, you can deduct a portion of your rent if your home office meets certain standards. Listing out all your deductions is called itemizing your taxes; you can also choose to take a standard deduction instead. If itemizing your taxes won’t give you a higher deduction than the standard deduction, then there’s no sense in bothering to do it–and, indeed, 68.5% of households don’t.
If you owe anything, of course, you should pay it when you file your taxes. It’s also possible that you don’t owe anything, or that you’re actually due a refund. Those taxes that come out of paychecks when you work for an employer are payments “withheld” by the government to cover your tax obligation. Your actual tax bill might end up being slightly higher or lower than the amount that was withheld, so you may end up having to pay more–or may end up waiting for the government to send you a refund!
So it might not be a problem that you haven’t filed taxes while in school, say the New York City tax lawyers at Mackay, Caswell & Callahan–though they caution that you can’t know for sure unless you crunch the numbers, and that you should only get legal and tax advice in-person from an attorney or certified tax professional. But if you didn’t owe taxes–or left a refund on the table–then the IRS is not going to come after you for not filing.
When you graduate and get a job, though, you’ll want to be sure to file. You have to pay the taxes you owe, or you’ll end up paying a penalty on top of the debt to the IRS. And if you end up being owed a refund, great–you’ll get some money back and can rest easy knowing you’re not in trouble with the government.
So how do you actually go about filing your taxes? One option is to do them the old-fashioned way by filling out IRS forms yourself. If you have a fairly simple filing–for instance, if you earned all your money from just one employer–this isn’t as tough as it may sound. Of course, it’s even easier if you use tax software or a tax pro. And using software or a pro is a good idea if your taxes are a bit more complicated–if, for instance, you had more than one employer in the same year, or did some freelance work, or own property, or sold stocks.
And don’t forget to do your state and local taxes, if necessary. Some states and cities have taxes of their own. This is another case in which it pays to hire someone or rely on a tax program (a decent tax app or program will just import information from your federal return into state and local ones, so that you don’t have to enter anything twice).
“Death and taxes. In this world nothing can be said to be certain, except death and taxes.” — Benjamin Franklin