By Meghen Jones
Who wouldn’t rather fly through college without the slightest inconvenience or mention of adult responsibility? Even though it sounds nice, it’s a tad bit unrealistic, especially considering the cost of modern living. Now that you’re responsible for yourself, you’ll need a steady line of financial support to keep your stomach full, school supplies stocked, and tuition and fees paid. It’s no wonder why you have committed yourself to working a part-time job to make ends meet.
So, what’s the deal with that large lump sum that is removed from each paycheck? It honestly makes your heart sink once you realize that two weeks of hard work was overshadowed by federal and state taxes. Not only that, but you’re expected to face tax season once a year without help from your folks. If you’re completely new to the whole tax return game, just think of it as a time of year—typically between January 1st and April 15th—where taxpayers must prepare financial reports on their earnings from the previous year.
Since uCribs is well-aware of how intimidating tax season sounds, we have compiled 5 helpful tips that cover all that you need to know before filing taxes for the financial year. Now, let’s get to work!
Be aware of the due date.
We’re sure that you are no stranger to due dates, as a college student. Never negotiable, due dates are usually the dates you’re expected to turn in your assignments, which are typically pre-determined by your professors on their individual course syllabi each semester. Like turning in any assignment or project, you need to get an early start on your taxes to avoid missing the due date. The Internal Revenue Service (IRS) requires that all forms are complete by Tax Day, which falls each year on April 15th. There’s only one exception—if April 15th should fall on a Saturday or Sunday, Tax Day falls on the next business day.
While it seems like you still have plenty of time to get it together, realistically, you only have approximately five weeks left in this fiscal year to meet your due date. Trust us, the due date will creep up on you faster than your professor’s 11:59 p.m. deadline—and one institution you don’t want to mess with in your adult life is the IRS. If you fail to file a tax return or contact the IRS for an extension, you will—without a shadow of a doubt— be subject to penalties and interest that increase the amount of tax due. So, nail down an accountant, agency, or the software program that you want to use, and you’ll have those pesky taxes completed in no time at all.
Keep track of any deductions and credits.
No matter how much penny-pinching you do as a college student, it never seems like enough. So, if you are fortunate and receive a tax refund, it could be a huge game-changer for your savings account. However, your accountant (or accounting software) can only do so much of the heavy lifting without your help. For this reason, you must be proactive and organize any deductions that you’re due to receive well ahead of time.
Relatively, deductions lower the amount of taxable money you owe to the government. The good news is that college students can receive generous tax benefits for their costly education, especially if you are using your hard-earned income to pay for college out of pocket. If you aren’t sure about your eligibility for deductions, the IRS offers an Interactive Tax Assistant Tool to help you figure out which deductions apply to your yearly finances. It will also answer any additional tax-related questions you might have. Don’t forget that tuition and loan payments aren’t the only things you’re allowed to write-off as a student: textbooks, school supplies, and other required fees are also fair game.
Be sure to include your W-2 or 1099 form.
Two of the most important documents that you will need to complete your taxes as a college student are an Employee Wage Report (W-2) or Form 1099, if you’re a freelance or contract worker. A W-2 is a form issued by an employer to an employee by January 31st and must be included with any tax filings you make for the fiscal year. Whether you’re a current employee or a past one that’s worked for a particular company in the last year, you must receive a tax form from this business by the end of January. It’s the law!
Not only does a W-2 document your income from the previous year, but it also shows the cumulative amount of tax deductions, insurance benefits, and retirement savings subtracted from your checks. On the other hand, if you are an independent contractor you will be fully responsible for paying taxes on your earnings, as these deductions are not typically made for freelancers. It’s usually suggested to set aside around 30 percent of each paycheck or direct deposit received, in order to compensate for the lack of deductions. Plus, you won’t be in an uncomfortable position financially once tax season does inevitably arrive.
…And, do not forget about your 1098-T form.
Other than the forms that you need to indicate the amount of money you brought in for the fiscal year, you’ll also need to focus on the ones that are prevalent to your education, like the 1098-T. In a nutshell, this form communicates to the IRS how much money you spend on tuition and school-related expenses during the tax year. This half-page form is short, sweet, and straight-to-the-point. Better yet, your university will fill it out for you completely, so all you have to do is cross your T’s and dot your I’s when it comes to completing the appropriate boxes on your tax return.
Like the W-2 or 1099, you receive from your current employer or contractor(s), you should get the 1098-T from your respective university by January 31st. Some universities send them through the mail, but many have begun uploading them to students’ online payment portals, where they would normally pay for tuition, parking, and other important academic fees during the semester. All you have to do is login with your username and password and click download, or take a screenshot –then, boom! You have all the information you need instantaneously. Isn’t technology awesome?
Choose your preferred software program or accountant.
Now that you have all of your dates and personal information in order, it’s time to actually do your taxes. It’s completely up to you how you wish to achieve this feat—and since you have all of your forms on deck, you’ve already made your way through half the battle. Today, many people, especially college students with a tight budget, choose to use accounting software, like TurboTax or Tax Act. Since your taxes are most likely simple at this point in your life, it’s beneficial to take advantage of this method while you can, being that it’s both fast and affordable.
If your tax return requires a little more work, however, it doesn’t hurt to call in a professional. There’s no doubt that taxes can be difficult, and trained accountants can lay the groundwork, saving you time, money, and the dreaded return letter from the IRS that notes a mistake you made along the way. An accountant might also be more up-to-date on any tax code changes within the previous year, which could potentially equate to a larger return. Whatever route you choose, simply think of the money you spend as an investment in your future.
While filing taxes may seem like a serious responsibility, it’s just another stepping-stone on your journey to adulthood, and unfortunately, it cannot be compromised or negotiated with. Whatever happens in your life throughout the financial year, you must—without fail—file your federal and state taxes to remain in good standing with the local and national government. Before getting started, do your proper research and check out these 5 tips that will make the much-dreaded U.S. tax season easier to handle—as if you need any more stress…