College life comes with a set of expectations that you just didn’t have in high school. Along with making sure you pay rent and utilities on-time, learning to co-exist with a roomie other than your folks, and keeping your fridge stocked with healthy foods – okay, and a few guilty pleasures! – paying taxes is one of the most “adult” duties that you’ll have as a current college student or near graduate.
Filing your taxes as an independent isn’t just a mark of adulthood – it’s something you are legally obligated to do. If your parents are no longer claiming you as a dependent, you are now viewed as an adult in the eyes of the IRS and must file your taxes. If you earned more than $12,200.00 for the entire year of 2020, then the IRS is expecting to receive your tax forms. Keep in mind that you’re legally entitled to any refunds the IRS owes you, and that money can go a long way in paying down some student debt, or at the very least, treating yourself to a few cool and breezy additions to your summer wardrobe.
You should always consult an accounting professional or the Internal Revenue Service’s website, if you are uncertain about how to file or what forms you’ll need to get the job done. However, uCribs can point you in the right direction, with these tips to keep in mind when you’re filing your taxes for the very first time.
Know the difference between an employee and independent contractor.
No, you’re not imagining it – 2020 was the year when just about everyone jumped on the side hustle bandwagon, as a way to earn a temporary income while the pandemic ravaged jobs nationwide. As a result, you might have earned a fair income as an independent contractor, as opposed to working on-site as a regular part-time employee. When it comes to filing your taxes, knowing the difference between the two is vital. Luckily, it’s a pretty simple concept to grasp.
If you are an employee, the company you work for withholds income tax, Social Security, and Medicare from wages paid. If you are an independent contractor, no taxes are withheld from your check – meaning that, while you may earn more up-front, you must report this income and pay any taxes you may owe to the federal government and your respective state of residence. Still confused about which category you fall under? Speak with your superior, if possible, or visit the IRS’s website, which has more in-depth information about each type of worker and their applicable tax forms.
Determine whether you can claim student loan interest deductions.
Are you among the 70 percent of college students, who have taken out some type of loan to fund your education? If so, you might be able to deduct student loan interest from your taxable income. Just be sure that no one is claiming you as a dependent. You also cannot be married, and if you are, you must be filing separately. You must also be able to prove that you earned less than $70,000.00 as a single filer in 2020.
If you meet all of these requirements, you may see up to $2,500.00 appear on your 2020 refund. This amount can vary by tax file, but those who paid a lot of interest on student loans in 2020 could be eligible for the maximum return. Even if you didn’t pay much in loan interest last year, a Form 1040 will guarantee some sort of deduction for the current year. Remember, even if you aren’t getting back the big bucks, a little bit of cash back is always worth the effort!
No accountant contacts in your iPhone? You can e-file quickly and legally.
Between keeping your numerous tax forms organized, inputting all the various information in the different fields, and triple-checking your numbers as you go, filing your taxes can be burdensome. Not to mention, the entire process can be anxiety-inducing, since there is a lot riding on the accuracy of your tax forms. No one wants to experience delays in getting their refund, and if you miscalculate something or misrepresent your income in any way, you could be up for an audit.
It’s always recommended that you enlist the help of an accountant, if you’re able. These financial professionals can at least double check your work before sending along your forms to Uncle Sam. But, if you don’t have the resources to do so, you can always file your taxes online through a more readily available software. E-filing can be safer than filing manually, since tax services encrypt your data and save you from having to mail in your forms. Plus, these intuitive, cloud-based software programs can help you snag deductions that you may have missed. They are often backed by accuracy guarantees, meaning that you can file with them without much tossing and turning at night.
Filing your taxes can seem like a scary, insurmountable task, especially when you’ve never tackled it on your own before. Though tax season can be stressful for newbies, filing your taxes isn’t anything that you’re unable to handle on your own as long as you understand these key pointers about the process and what options are available for college students. These 3 tips will help you get started with filing your 2020 taxes, like the total boss we know you are!