Tackle Your Taxes
by Ellianna Tait
Taxes…. It seems almost like it should be a bad word, am I right?
Should I file? When should I file? How does one even file their taxes? Should I hire an accountant? Should I use one of those online services? Do I use a 1040? What if I have my own business? There are so many questions around the topic of taxes. Hopefully, I will work with you during this post to be able to work through some of these questions, so that taxes do not seem quite as scary to you as they once were!
First question: Should I file my taxes?
If you make less than $12,400 per year, then you may not have to file. The reasoning: there is a standard deduction for single individuals of $12,400 per year. This means the amount of income up to $12,400 is canceled out dollar for dollar by this standard deduction, bringing your taxable income down to $0. However, if you still had your taxes withheld on the income that totaled less than $12,400, filing a tax return could refund those withheld taxes. Conversely, if you make more than $12,400, you are required to file a tax return.
How do I know if my taxes were withheld or not?
At the end of the year, your employer will send you a document called a W-2 form. This will show how much you made that year, how much was withheld for payroll taxes, state taxes, and federal taxes. If you have received this form AND made less than $12,400, review the W-2 for a 0 next to your federal withheld and state withheld taxes. If you see a 0, no amounts were withheld, and you do not have to file. If there is a number next to either of those sections, then your taxes were withheld.
When should I file?
If you haven’t filed your 2020 tax return yet, you’re in luck, the tax due date has been extended this year from the normal day of April 15th to May 17, 2021.
Should I hire an accountant?
For most college students, it doesn’t make sense to hire an accountant to fill out the tax form. Most student tax situations are pretty simple! However, if you are a small business owner earning a solid income, you may have multiple forms and potential tax deductions a tax preparer may be able to assist you with. Individuals that earn more than $400 in self-employment income are required to file a tax return.
If you decide to tackle your taxes on your own, most students use TurboTax or some sort of other online service. These software services simplify the process by taking you step by step through the required tax forms. Gather all of your supporting tax documents (ex. W-2, T-1098, 1099 forms, etc) prior to starting the process so you have your information readily available. These platforms typically offer a free option for simplistic situations but will apply a charge for more complicated situations or e-filing state returns. Be sure to look into the pricing before you sign up!
I hope that the thought of taxes no longer holds the same level of fear and worry that it once did and that you feel more confident and ready to tackle your taxes this year!
Do you have questions about your finances? Consider meeting with a Peer Financial Coach from the Center for Financial Literacy. They would love to provide guidance on topics such as budgeting, investing, saving, and much more. Book a session!
