In 2013, I moved 1000 miles away from home to Nashville, Tennessee. The one friend I had in Nashville went off to college, and I found myself in a new place with a new life to create for myself. I got a job, found an apartment, and lived as a real adult…right after high school. That year changed my life for the better (and certainly prepared me for college), but I definitely got through some bumps and bruises to get there. Because of that, I wanted to start a short series called “how to adult,” which outlines some of the common struggles of moving out on your own, supporting yourself, and navigating the real world.
Last week, we covered cars. This week, by popular request, I’m going to talk about taxes. Full disclosure: I have never done my taxes, because my family has filed together. However, this year I worked with our preparer to file in four separate states, and I have helped friends with Turbo Tax before that.
The most important thing to understand is that filing taxes is a possible task, and not too difficult. Doing your taxes is a similar experience to writing your first research paper. You may feel unqualified, but you can do it. You just have to give yourself enough time, ask questions, and double check your answers before you submit.
How Do I File?
There are a few ways to file your taxes. The first is to hire a preparer, like H&R Block. Most young adults don’t do this because preparers are expensive. However, they do make the process easier and they also may know how to minimize how much you end up paying (or maximize your tax return). The other option is to file yourself. You can do this through Turbo Tax, Tax Act, or other online services.
Many college students don’t actually need to file taxes, and you can look online to see if you meet the income requirements to not file. However, depending on your deductibles (which we’ll get to later), you may qualify for a small tax return (which means you would actually get some money back). Most likely, you will file a document called the 1040EZ, he 1040A, or the 1040.
In addition to federal taxes, you also have to file state taxes. These vary state by state, but you can also do them through a preparer or online.
What do I need?
Before you start, set aside at least one afternoon to finish the process, and then another hour to check your answers. In addition, you should have a good idea of your income and spending habits. Your employer should have some record of your earnings. Most often, this information comes to you through a form called a W-2 (another common form is a 1099), which lists your earnings for the year as well as how much money the government and your state has taken out already. Sometimes, a portion of the money taken out goes into your return. The rest of it funds a variety of government programs like Medicaid.
In the future, you should think of keeping your financial and legal documents in one place, so they don’t get lost. That way when you go to do your taxes, you don’t spend extra time running around looking for all the information you need. Also, it’s a good idea to keep at least a rough record of your spending. Not only does this help you at tax time, it also helps you manage your money year-round. An easy way to keep track of your money is to keep purchases on one or two debit cards. My bank has an online portal that automatically keeps track of what I spend money on, and then has an option to see how much money I spend per month in the categories of travel, food, entertainment, etc. This information is useful for your deduction.
What are deductions?
Deductions are figures that you can take out of your taxes, or money that you deduct from the amount you owe. These include professional expenses (like commuting expense or meals) and money given to charities. If you have extremely large medical expenses, you can deduct them too. And, the best part: you can also deduct tuition expense, or receive an education credit.
In review: taxes are not as difficult as you think. Honestly, they’re mostly boring. But they are something that you are more than capable of.
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