Taxes. One way or another, everybody pays them. And at the beginning of every calendar year, most of us have to figure out how to file our tax return.
Filing your taxes can be time-consuming, confusing, and stressful. We’re here to help. Money Under 30 can help you navigate some of the most commonly-asked tax questions (and point you in the right direction for answers we don’t have).
Who has to file a tax return?
If you earned a certain amount of income in the United States, you’ll likely need to (or want to) file a federal income tax return on or before April 15. Although certain people earning less than a certain amount in a year are exempt from filing a return, you may want to do so anyway because you may be due a refund or credit.
Ok, how do I file my tax return?
Technology makes it easier than ever to file your taxes. The best tax software programs let you start your return for free and use friendly on screen interviews to guide you through the process. These software programs are ideal for all but the most complicated tax returns. Many will let you file your federal income tax return for free and charge a nominal fee ($20 – $30) for your state return. Fees may go up if your return includes advanced items like business or investment earnings.
How do I get started?
Before you can file your tax return, you’ll need to collect all of the documents you’ll need. For most people, this is just the W-2 provided by your employer in January showing how much you earned over the year. You may also get 1099 forms from banks (showing any interest you earned on savings) or from companies who paid you more than $600 as a contractor. Other forms include statements showing the interest you paid on student loans and/or your mortgage. Finally, you’ll want to organize any receipts for tax-deductible expenses like charitable donations. Our simple tax document checklist can help you get these documents organized.
Will I get a refund? How much tax will I pay?
Although it’s impossible to accurately estimate your final tax liability until you complete your return, you can determine your marginal tax rate (or tax bracket) using this chart. Keep in mind this chart is based on your taxable income after certain allowances and deductions.
Every taxpayer wants to reduce his or her tax liability in every legal way possible. Here are some articles that can help you take your maximum allowed deductions.
- Is Mortgage Interest Deductible?
- A Beginner’s Guide to Itemized Deductions
- What’s the Difference: Tax Credits, Deductions, and Adjustments
- The Tax Benefits to Home Ownership
- A Checklist of Common Tax Breaks
Tax compliance: Avoiding mistakes and audits
Taxation in the United States is largely an honor-based system, albeit one with stiff penalties for non-compliance. These resources can help you ensure your taxes are in order and minimize your chances of attracting the unwanted attention of IRS investigators.
- Should You Hire Someone to Prepare Your Tax Return?
- I Got a Large Cash Gift: Do I Owe Taxes?
- What Are the Chances of Being Audited?
- I’m a Waiter/Bartender/Barista/Etc.: Do I Have to Pay Taxes on my Tips?
- How to Avoid Simple Tax Return Mistakes
- Is it a Hobby or a Business?
- Filing a Tax Return After a Period of Unemployment
- Dealing with a Correspondence Audit (CP-2000)