Hi there!
Since no one answered my poll (sigh) I decided the next topic on my own. Filing your taxes (or Form 1040)! How fun! The deadline is April 15, so you still have a decent amount of time to gather everything you need, plop yourself down on a couch, and do the dreaded task that no one wants to do. I actually think filing taxes are really fun, mainly because I know that I'll likely be getting cash at the end of it.
Why do I have to file in the first place? The government wants a little piece of every dollar that you make. They need that money to give us highways and public schools and parks and unemployment benefits and everything else to run this country. They also want this money consistently throughout the year, which is why every time you get a paycheck you should see federal and state and perhaps city withholdings. Your employer takes out the amount of taxes from your paycheck that it thinks you owe, but it's an estimate. It doesn't account for any deductions that you may have or credits that you may have earned. So, when you file your taxes, you are taking that estimate and adjusting it to what it really should be. It may be the case that you have underpaid your taxes throughout the year, so you will owe money, or it may be the case that you have overpaid your taxes throughout the year, so you will receive a refund.
What do I need to file? Before you even think about filing your tax return, you need to have your W-2. Your employer should either mail it to you or allow you to access it electronically at your workplace, but this is the most important (and sometimes only) document you need. It's the backbone of your tax return. It lists out your earnings, federal and state withholdings, and other taxes that are all entered into the tax form. The company also sends your W-2 to the IRS, so the IRS will be able to see any discrepancies between what you file and what is on the W-2 that they receive. If you have multiple employers, you should receive a W-2 from each employer, and you'll have to enter all of this information separately into your tax return.
What else do I need? Depending on the deductions/credits that you plan to take, you'll need a few more documents. If you gave any money to a church, synagogue, or charity, those organizations should provide you with documentation listing the total amounts you've donated throughout the year. Donations to charities and nonprofits are deductible. If you made student loan payments, your servicer should provide you with the form 1098-E, which lists out the amounts paid on the interest portion of your loan. Only the amount paid on interest is deductible.
Did you do Standard vs Itemized? I hear this a lot. These are the 2 types of deductions. The standard deduction is the deduction that the government gives everyone, regardless of the deductions that they actually have. It varies a little each year and is different if you are married or single, but for individuals, the standard deduction is $6,100 for the taxable year 2013. The itemized deduction is calculated on your own, and you will obviously only itemize if your deduction is greater than the standard. How do you calculate it? You use the various tax forms that you've received and just add up what your potential deduction would be. If you use any programs (like the ones mentioned below), the program will calculate the deduction and determine whether you should use the standard or itemized deduction.
There are a bunch of sites that offer free filings of the federal return (states are a different story). You can file through the IRS, TurboTax, TaxACT, or H&R Block all for free. Because we are pretty simple people with only a few simple deductions, it's really not necessary to buy a TurboTax Deluxe program or hire an accountant. Remember that you also have to file a state return for every state in which you have earned income, and you usually have to shell out some money for these returns (no more than $30).
Happy tax filing!
Ali
