Hooray! You did your taxes this year (I hope) and now can sleep at ease knowing that a tax return is safely being mailed to you — or sleep horribly thinking of the horrors of wage garnishment and frozen bank assets, because you underestimated your tax bracket and didn’t adjust from last year.
For most of us young folks it’s either going to be a spending or a saving spree, as we get back what was essentially a zero-percent interest loan to the federal government. So what exactly goes into doing your taxes? Will you need to amend your return? Can you adjust your taxes to prevent a large return or a large debt? These are all important questions for college-aged students who aren’t typically taught about taxes in high school.
The first thing you’ll meet in the quest to do your taxes is a certain paper sent to your mailbox: a W-2. This is the first sign that the end is nigh and that every day that passes is a procrastinatory step. The second sign is a bonafide barrage of advertisements on TV about tax season, with meticulously detailed lady liberties claiming that they alone can get you every dollar you deserve.
It’s best you don’t lose your W-2s, as doing so could cause a slew of headaches, not the least of which being the possibility of identity theft, as your social security number is printed right on the first page. Time recommends you contact your employer first and the IRS second if you lose it, and amend your filing later once it’s safely in your hands again.
Now, if you’re like me, you’ve most likely discovered the wonders of modern automation, otherwise known as electing to have someone else, specifically someone else’s computer program, do your taxes for you. This is not an endorsement, but companies such as TurboTax, one of the most popular tax software companies, will let you file your taxes for free if you made $33,000 or less and have a relatively simple return.
If you’ve already done your taxes but discover an error, there’s a process known as amending your taxes, which is when you file a 1040X, an amended version of the fabled 1040 we’re (mostly) all familiar with. To do so, you’ll need all of your original documents, receipts, and new documents, and you’ll need to go through the tax filing process all over again to discover how it affects your return. Good news though: You won’t need to update everything, just the new and pertinent information on the amended form.
Earlier I mentioned that you can adjust your taxes, and for some this can be extremely useful, as any tax return is simply money you overpaid to the federal government and any taxes owed means you underpaid. Ideally, you want to have the smallest return possible, as it would appreciate faster in an average savings account than being held by the federal government.
If you owe the IRS, you can claim fewer personal allowances for the next year. If you got a refund, you can claim more allowances on a W-4, also known as an employee’s withholding allowance certificate. A W-4 is usually signed with your employer upon being hired and swiftly forgotten. Its purpose is to have your employer know the amount of money that should be withheld from payroll to pay into federal taxes before the remainder is paid out to you.
To update your W-4, you must file a new one with the IRS, as you cannot actually physically update the old one. A new W-4 submission will take the place of the old one. The next step is to go line-by-line through the personal allowances to choose the correct ones that apply to your situation: whether or not your spouse is employed, whether or not you have dependents, etc. These can help accurately predict what credits and deductions you will be able to claim come tax time.
Updating your W-4 every year can potentially prevent the headaches of owing taxes or the inefficiency of getting a check for an amount you overpaid to Uncle Sam over the course of the working year. Of course, there are numerous guidelines surrounding W-4s, but should you go the route of adjustment, all you have to do for these situations is give the updated W-4 to your employer.
Reach writer Zackary Bonser at specials@dailyuw.com. Twitter: @ZackaryBonser
