Grown-ups, taxes are officially due one week from today!
Now, I don’t mean to brag or anything, but I did finish my taxes back in February. My crippling fear of doing them incorrectly and having the IRS come after me is what spurred me to get on them so early.
But finishing them then had its perks, namely getting me my federal and state refunds less than a week after filing. So I’ll be the first to tell you the process is both painful and scary, but that the refund is worth it. Plus, you know, not being hauled off to prison for tax evasion is always great.
Whether you haven’t finished your taxes yet or just want a few tips to hang on to for next year, me and my MacBook Air* are here to help.
6 Tips for Navigating a 20-something’s Taxes
1) Don’t be afraid to ask your parents for help
I know plenty of people whose parents assist them with their taxes. I even know a few grown-ups in their thirties whose parents still do their taxes. While the latter option seems a little childish, I get it. Taxes only become more complicated as you get older, make more money, and start adding spouses and children to the equation. That is why I think getting a handle on this thing when it is still fairly simple is a good idea. And you know who can help you with that? Your parents.
They have been doing it since before you were born, and it is one of those things that really doesn’t change much year-to-year. You will need to be on the lookout for things that specifically apply to you (see below) as your parents haven’t been in their twenties for a while and new deductions, credits and other tax breaks are added every year. But, all-in-all, doing your taxes with your parents holding your hand the first few times is nothing to be ashamed of.
2) Talk to your parents to make sure you are on the same page
Even if you aren’t going to parents for help filing, you still need to talk to them about your taxes. Why? Well say your parents plan to claim you as a dependent (not that you aren’t independent in so many other ways of course), that is going to affect your own filing status.
The IRS will let parents claim children who are under age 19 or a full-time student under age 24, as long as the kid is not earning above a certain amount. So make sure everyone knows who is claiming you, especially if you are still living with them or being financially supported by them.
Rule of thumb: If you live at home and have no job they can probably claim you. If you live at home and have a job then they probably can’t.
3) File electronically and freely
Filing electronically is the norm nowadays, which is great because it saves time and reduces errors. I used H&R Block’s free online software for both my 2013 and 2014 filings and it was fantastic. Why? Because it constantly reviews everything you have put in and basically goes, “Uh…are you sure?” if something seems fishy.
For most twenty-somethings there is no reason not to, as the IRS and the tax software industry gives access to free tax software to those earning below $60,000.
4) Love your student loans
Much like the IRS, Sallie Mae will come after you if you don’t obey her.
But when filing taxes that feminine personification of your education-based debt is your new best friend. You see all those payments you’ve been painfully sending her way since you left school can actually lead to a tax deduction. Yes, student loan interest is eligible for up to a $2,500 deduction. But there are income limits that apply here, so make sure you qualify first.
You can even take this deduction without having to itemize your taxes, which is fantastic because the next crippling tax-related fear I have is when I have to start itemizing.
So if you remember nothing else, remember this tip, as it is was the thing that bumped up my refund the most.
5) Don’t forget your other academic-related credits
To all of you who are still in school, congrats! Cause you have a nice tax break coming your way in the form of the American Opportunity Credit. This offers you a credit of up to $2,500 for expenses each year for the first four years of college (though there are income limits that apply here).
But even if you’re done with that B.S. life, the Lifetime Learning Credit offers a tax break of up to $2,000 for eligible expenses related to courses taken for academic credit or career development.
Like always, income limits do apply. But there is no cap on the number of years that you can use the Lifetime Learning Credit. So that is more of a reason to always keep learning! Ya!
6) Don’t be afraid to file an extension
If you don’t think you can file by April 15, you can get an automatic six-month extension. The simplest way to do this is through the Free File link on IRS.gov, where you can electronically request an automatic tax-filing extension on Form 4868. This form will give you until Oct. 15 to finish up. But in order to get the extension you have to estimate your tax liability on the form and pay any amount that might be due.
Filing this form gives taxpayers until Oct. 15 to file a return. To get the extension, taxpayers must estimate their tax liability on this form and should also pay any amount due.
If you request an extension, you will avoid the late-filing penalty that applies to returns that are filed after the deadline. Promise me you will do this if you have to file late, as that penalty is about five percent per month based on your unpaid balance.
Now go forth and fear your taxes nevermore! And one day, hopefully, it will become less scary and stressful. But probably not.
*Brought to Jenny by her tax refund.
Image Credit: Awesomely Luvvie