The Millennial’s Guide to Doing Your Taxes
Tax season is at last upon us. (My fellow Millennials, how is it already here? I know February is a short month and I’ve kept warm with lots of mulled wine, but still…) Before you call your trusty mom and dad crying about what to do with that R2D2/W-2 Form, or whatever, here is your touch-point guide to getting things done right–whether you’re working full time, freelancing or hustling as a small business owner/entrepreneur.
Getting Started
Before you file your return, you’ll need to gather the following personal information, as Christopher Piper of DriveTime reminds us in the same way he preps his clients: Social Security Number, 2013 tax return, personal identification number (if you wish to use it instead of last year’s AGI to verify your identity), W-2 and 1099 statements, income and expense receipts, and benefit statements such as unemployment.
If you have your own business, you’ll want to include your EIN number, the date in which your organization was established, and review your Profit and Loss statement to determine your business’ tax obligation.
To identify the latter, you would have had to keep your income and expense reports in pristine order. If this isn’t the case, don’t panic. You can hire a bookkeeper to quickly meet this year’s tax deadline, but going forward, get yourself some easy-to-use accounting software like Kashoo, a cloud-based program with corresponding apps for iPhone, iPad Android that will help you manage invoices, expenses, payments, and everything else you need to dominate tax time.
Pick the Process
Now, decide if you’ll file your taxes yourself or if you’ll hire someone to do it. Vicki Zhou, co-founder of WiseBanyan, which boasts the first free, fully automated online financial advisor, sees the pros and cons of going the DIY route and consulting a professional.
He tells us, “I love the concept and execution of services such as TurboTax. Software like this has the added benefit of being cost-effective and timesaving. With that said, if you’re self-employed, working with a traditional accountant often has the benefit of maximizing the year’s tax return (or minimizing your tax bill). Accountants usually have the drive to prove their value by pushing and prodding clients to find additional ways to maximize deductions, which doesn’t happen with tax software. I generally recommend finding the right local accountant over working with a chain firm, because they usually have more experience and provide a trusted resource to make tax season easier every year.”
Account for Student Loans
According to Andrew Josuweit, CEO of Student Loan Hero, Millennials with student loans are at risk of leaving money on the table or missing out on ways to make their payments more manageable during tax season. Here are three things Josuweit says every college grad should know when filing his or her taxes:
1. By declaring student loan interest paid in 2014, you can receive up to $2,500 in deductions. If you have an income-based repayment plan or public service loan forgiveness, you need to reapply based on your 2014 income. Lastly, parents who have a dependent in school, or who recently graduated, should write off education expenses.
2. If you have an income-based repayment plan or public service loan forgiveness, you need to reapply based on your 2014 income.
Don’t Forget the Affordable Care Act
This is the first-time taxpayers must report their health care status on their tax returns. By law, all Americans must be insured, and there will be a section to confirm that you have health insurance. Those who are uninsured will be penalized monetarily, unless an exemption is granted.
If you purchased health insurance through Obamacare’s health insurance exchange online, you will have additional steps to follow, including attaching form 1095-A (which will be sent to you by mail directly from the exchange) to your tax return and completing form 8962if you or a member of your household received premium tax credits in the form of subsidized premiums, as explained in more detail by Tara Siegel Bernard in her NYTimes.com piece “How Affordable Care Act Rules Affect Your Taxes.” Additional questions and answers on the subject to better understand how you should properly report your status are also included in the article.
In the end, make a plan. “When that check arrives, you’ll want to have an idea of what you will do with it,” Piper recommends. “Whether you’re planning to pay off a credit card, deposit your government refund in your savings account or invest in a vehicle or housing upgrade, you’ll at least lower your chances of spending the money impulsively.”
Are you a tax master? Share some tips with us in the comments below.
This was originally published on Levo League by Megan Broussard
