Money Monday: Tax Season

Happy Tax Season Everyone!

It’s that time of year to file your taxes and it can definitely be a love-hate relationship. Some people love tax season, aka those that are getting refunds. Others simply hate tax season because they may owe money or because of the complex forms and looming deadlines. Then there are people like me who are completely lost when it comes to taxes. In all honestly, I usually hand my W-2’s to my parents and let them take care of everything. But since I’m growing up, I figured I would do some research to help prepare myself for next year! For those of you who want to try it on your own, here are some tips for you:

Where Do I Begin?
The internet will now be your best friend! Filing taxes can be quite intimidating and overwhelming for first time fillers. But, thanks to the FastWeb, you can find the basics of filing taxes and they make it easy to understand for beginners like yourself.

What Does It All Mean?

Before you dive in, master some of the terms you need to read IRS documents:

  • Earned income – Salaries, wages, tips and professional fees, including taxable scholarships and fellowship grants.
  • Unearned income – Investment-type income like interest on your savings account, dividends and capital gains, as well as unemployment compensation.
  • Gross income – All income you received in the form of money, goods, property and services that is not exempt from taxes.
  • Exemptions  – A predetermined amount of money you can deduct from your taxable income for basic living expenses. You, as an individual, may be an exemption, and dependent children (which you probably are to your parents) qualify as exemptions.
  • Standard deduction  – A set amount of money that the federal government gives you if you meet certain stipulations. It differs according to marital status.
  • Itemized deductions – There are six main categories of expenses that can be deducted: medical and dental, taxes, interest, charitable contributions, and casualty and theft losses. Itemized deductions reduce the amount of tax you owe.
  • W-2 Forms – Wage-income forms that you receive from employers in order to prepare your taxes.
  • Filing status – Whether you are single, married or head of household. There are several sub-categories within each of these as well.
    Itemize what?

Itemizing Your Deductions.

There are certain deductions that we are entitled to, that result in a lower tax base, and means that you have to pay less in taxes. That’s a win-win. But, with that itemized list comes the “long” form of the 1040.  You should itemize your deductions so they are more than your standard deduction. If you don’t exceed your standard deductions, you are still able to itemize your deductions on the long form. It’s your choice!

When To Pay?

The deadline for taxes is April 15. They do have extensions that you can apply for but, that extension is only to file, not pay. So have your check ready by April 15th. Plus, the earlier you send it in, the earlier you will get your money! Don’t wait until the last minute!

Until Next Time,

Jessica M.

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