“You must pay taxes. But there’s no law that says you gotta leave a tip.”–Morgan Stanley advertisement
Taxes are the forbidden topic of discussion for recent college grads or even those close to graduating. Most students depend on their parents to take care of it. I will admit, taxes were once a scary thing to me, but now I feel more confident about them. For those who have not had experience with their own taxes, it is in fact a scary thing. Luckily, there are ways you can avoid biting your nails each year when you have to do them.
- The government provides instructions for all the forms you have to fill out. I know it seems like a lot of work, BUT it is worth it. TRUST ME. It may take time to read it, but there are things you will learn.
- KNOW the kinds of deductions you can get. This is incredibly important!!! For my career, many of the jobs I will be doing involve form 1099 (independent contractors). In this form, I am able to deduct things that you would not even think about, saving me more money in the process.
- GO SLOW. The first time may be difficult, but after that, it gets a lot easier, and then all your friends will be jealous because you can do something they all thought impossible.
- EVERYONE should know how to do taxes. Don’t depend on a spouse or sibling to know how to do it.
- On your first attempt, be prepared for a rough draft, then you won’t stress out if you make a mistake.
- There is no shame in asking for help. Unless you are a certified IRS employee, I guarantee you have or will have gotten stuck on at least one thing on a single tax form. In fact, even the teacher who taught us how to do our taxes got stuck on a few things.
So let me break to down for you:
1. the 1040 form is the basic form that the IRS needs from everyone, even if you are self employed. This is the starting place for most of you who are just out of college. The IRS provides instructions for the 1040 and in general they are pretty easy to figure out.
2. As you go along the form, you will notice words such as “Schedule A” there are several “Schedules” which are attached forms you might have to fill out as well.
Schedule A: for Itemized deductions. Most college grads are better off taking the standard deduction (which is $6,100). You may fill out schedule A to make sure yours are not more when itemized. Really it just means going into detail about all of the deductions you may receive.
Schedule B: for Interest and ordinary dividends. You will probably not need to fill this out, but just for you to check, you can go to this web address and see: www.irs.gov/scheduleb
Schedule C: For determining Profit or Loss from business. Unless you were a sole proprietor during college, you probably don’t need to file this one either. I had to file on as part of the make believe project and its pretty simple to follow.
Schedule D:for capital gains and losses
Schedule E: Supplemental income or loss. again, you probably won’t have to file this one either, unless you rented out real estate and such.
Are you noticing a pattern??? thats because if you studied at school and maybe worked a few hours a week, your taxes won’t be nearly as bad as you think. AND GUESS WHAT! each schedule has its own instructions if you do in fact have to file one. The IRS seems to understand how frustrating taxes are for each person in the country and have tried to make it easier.
HOWEVER, be aware of one thing:
I ended up working more hours in a year then the government thought appropriate for a full time student who did not have to pay tuition. There is a maximum amount line, and unfortunately I went over that amount, therefor resulting in owing the IRS a good chunk of money. Of course I was mad and felt punished for working too hard.
I hope taxes are a bit less frightening than you had originally thought at the start of this post!
Happy Filing!
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