Do You Understand the Basics of Filing Taxes?
As Benjamin Franklin wrote, there are only two certainties in life: death and taxes. To drive home that point, the IRS does not mess around when it come to collecting its money. Just ask the many people — celebrities as well as your average Joe’s — who have gone to jail for tax evasion.
With this in mind, you’ll want to get your finances in order, and it pays to be organized. How many times have you had to search for statements, receipts, computer files, or other documents that you needed to do assignments with? Taxes also require records, so get in the habit of keeping all your documents in one place that you have easy access to.
If you’re a full-time employee, you’ll receive a W-2 form, which summarizes all the income you earned and the deductions that were taken for Medicare, Social Security, health insurance, and other programs during a financial year. Don’t confuse this with a paycheck stub, which summarizes your income and deductions for each of your pay periods.
You must file a tax return if your minimum gross income (before any deductions are made) is more than $10,400, assuming that you are under 65 and your tax status is “single.” Single status means that you’ll be submitting taxes on your own, and not necessarily that you are unmarried. You can take advantage of the IRS’s Free File software if you earn less than $66,000.
As a student, you can deduct up to $2,500 from any income that you earn, which means that the first $2,500 of taxable income will not be touched by the government. This is known as a tax deduction. Anything greater than that amount will be subject to different rate deductions, depending on the amount earned. Also be aware that when filing your taxes, you can be affected by tax implications, depending on whether you’re married, submitting taxes jointly, the number of dependents in the home, and other considerations.
The tax year runs from the January 1 through December 31, and the deadline for filing and paying your taxes is April 15 of the following year. Taxes can be quite complicated, and there are many options for assistance in filing, including asking your parents, hiring a certified public accountant, and consulting a university help center.
Sometimes your money can be quite tight, and you feel as if you can’t follow through on financial obligations. However, by ignoring a bill or failing to pay your taxes, things can get worse for you in a hurry. If you ever find that you can’t pay in full, always contact the creditor, discuss what you can afford, and make a plan to pay in installments. The IRS also expects you to do this. If you owe people money, bear in mind that they also have plans for that money, and if they know when they’ll get it back, they can adjust their plans accordingly.