In the United States, it’s time for everybody’s favorite holiday.
Tax season.
Oh?
Not yours?
Well then.
Think about it: The sooner you finish your taxes, the sooner you get that tax refund
back from the government!
Or, if you owe taxes, the sooner you can get a payment plan started.
Here we’ll go over things you need to know if you’re the kind of person who’s stumbled
through doing your taxes before and found the process really confusing.
This can be the case especially if you have, for example, a main job and a side hustle
that brings in extra income.
So!
Let’s gear up and get into the spirit of things.
The first step is to gather your supplies.
Here’s a basic list of what you need to have with you to get your taxes done.We’re
assuming that you have at least one job, have student loans and have a checking account.
But personal finances are like snowflakes: Everyone is different.
One: The W-2s from your job or jobs.
This is the form that tells you how much income you received from your employer, and what
taxes were withheld from it.
Your employer is supposed to mail you your W2 by the end of January.
If you moved in the last year, you should check with your employer to see which address
they sent the W2 to!
Two: 1099 forms for your other income.
The 1099-MISC is for self-employment income; this is like the self-employed person’s
W-2.
It’s the form that helps you tally up the money you made as a self-employed person to
the government.
Then there’s other 1099s like the 1099-Int for income that was made from interest on
your checking or savings account.
Your bank should send you this form.
There’s also the 1099-Div if you own stocks or a mutual fund that pay out dividends.
Three: Other forms you may receive
If you paid at least $600 in interest on your student loans, you’ll get a 1098-E in the
mail.
You might be able to use this form to get back some of that money.
And a 1098-T if you’ve enrolled in higher education.
You might be eligible for an education credit or deduction, which is good news.
Check out this video that Mike made last year to learn about some lesser known tax deductions.
If you have an IRA, you’ll get a form 5498 from the institution or “trustee” that
manages it.
Four: Health care forms that show whether you signed up for the Affordable Care Act
or not.
These are your 1095 forms.
If you’re enrolled in the marketplace, look out for form A in the mail.
If your insurance comes from your employer, they may send you B or C depending on how
many people they employ.
Five: Number from your checking or savings account, because that’s the fastest and
cheapest way to get your tax refund from the guv’ment
You should also grab your social security card, if you don’t have your number memorized.
Six: Debit or credit card, if you’re using an online tax service that costs money
Seven: A top hat!
Okay, you don’t really, but if it helps you feel like a Monopoly tycoon, then go for
it.
Eight: Your favorite beverage.
If your taxes start to get frustrating, take a deep breath and sip a drink for a second.
Step Two, pick which way you’re going to do your taxes.
The old-fashioned way is to use paper forms.
The advantage to paper forms is that they are free, and you can find them at IRS.gov,
the post office and probably your local library.
The disadvantage is that, uh, who fills out a paper form anymore?
Seriously, paper forms can be intimidating and if you make any mistakes on them, that’s
on you.
For example, if you write down a digit of your social security number wrong, you will
get audited.
Yikes.
Online tax preparation services, like H&R Block and Turbotax, offer a lot of advantages.
And they didn’t pay us to say that!
E-filing your taxes is usually pretty fast, you don’t have to do any math by yourself
and their systems are designed to catch mistakes you might make.
The drawback is that these services can sometimes cost money if your taxes are more complicated
than just the 1040 EZ form.
Is $30-$50 worth it to you to not sweat over a paper form?
It’s totally up to you!
You can also visit a tax preparer in person, but that’s more expensive and really only
worth it if your finances are complicated and you have dependents to claim.
Step three?
Do your taxes!
We have videos that delve into this more deeply, here.
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If you assembled all your materials ahead of time, you can do your taxes in a couple
hours at the very most and get on with the rest of your beautiful life.
Lastly, don’t throw away all of the paperwork you just assembled!
Hold on to your tax forms and tax return for at least THREE YEARS in case the IRS decides
to audit you.
Audits are unlikely for the average person who files single and makes a modest income,
but you never know!
If you have any questions or stories about taxes or have a topic you’d like us to cover,
leave us your thoughts in the comments below.
And if you want to learn more about adulting with Hank and me, go to YouTube.com/LearnHowToAdult
and subscribe!