All right, all right, it’s time to get serious about paying your taxes. Maybe you’ve never filed them before. Or maybe you’ve just been handing your 1040s to your parents with a sheepish smile. No more! You may be a student, but if you’ve earned any income this year, you’ve got to pay your share, and now is a great time to learn how to do it yourself. Believe it or not, paying your own taxes can be an empowering step on your Adulting Journey. If you can pay your own taxes, I’m pretty sure you can do anything.
Paying taxes can seem overwhelming if you’ve never done it before. (Let’s be honest, paying taxes can seem overwhelming even if you’ve been doing it for 20 years.) But if you go slow and lean on the tools available to you, you can definitely do them yourself.
Who Pays What Taxes?
So, a little lingo to get you up to speed. If you work and earn income, you’re either an employee or a contractor. Employees are subject to a lot more control over their work. They file a W4 with their employer and receive a W2 at tax time. Their employer withholds their Medicare, Social Security and Income Tax and remits it to the government. Contractors, on the other hand, are freelancers, basically; they have much more control over their work and their hours, and they receive a 1099 from their client(s) at tax time. They are responsible for remitting their own Medicare, Social Security and Income Tax.
If you’re an employee, you report your income to the government, along with what’s already been held back by your employer. Then at tax time you either get the overage paid back to you (a refund) or pay the shortage you owe.
If you’re a contractor, you’ll pay quarterly estimated taxes based on your earnings.
How And When To File Your Taxes
With the exception of quarterly estimated tax payments for freelancers, you should file your taxes before the April 15 deadline. (The deadline is always April 15.) However, the best time for you to file depends a little on what’s important to you.
If you just want to escape late payment penalties, anytime before April 15 is fine. If you want to decrease your chances of tax identity theft or you just want your refund sooner, file as soon as you receive all your paperwork. That should be before January 31. You may receive your documents through the mail or electronically.
If you want to save money on tax prep, it’s better to take care of your taxes earlier in the season, like in February. You beat the rush and prices for tax preparation software is often lower then, too, and higher as the April 15 deadline approaches.
If you are going to owe, you may want to hang on to your money until the last second and file as close to April as you feel comfortable doing, without crossing the deadline. That way you can keep your money in the bank, maybe even earning interest, before you turn it over to Uncle Sam.
Which is Better: Pen and Paper or Online Tax Service?
Even the U.S. government itself says it’s best to use online tax preparation software for the easiest and most accurate returns. You can still file yours with pen and paper if you want to, but it will take you longer and be more at risk for mathematical mistakes. Most tax prep companies offer a guarantee on their computations. That means fewer computing errors, and a better chance of skipping an audit down the road.
Other benefits of online tax services include free filing options, quicker refunds, simpler filing and greater time savings — all great perks for a student. When you file online, you receive confirmation from the IRS that they’ve received your return, which is a great load off your mind come tax time. Plus, if you file electronically and choose direct deposit, you can have your tax refund chilling in your bank account before your next big night out.
Check out a few of the best rated online tax preparation services to select one that will work best for you. You don’t need to wait until tax time, either; you can input all of your information during the slow season, so that when you receive your paperwork in the early spring, you’ll be ready to go. Companies like H&R Block even save your details for the next tax year, so all you have to do is import your information with the click of a button. It cuts down on a lot of data entry and speeds up the whole process.
No matter what you choose to do, filing your taxes is an important part of being a productive, income-earning member of society… in other words, a taxpayer. Your contribution matters, so you might as well make the process simple, easy and affordable. Happy Adulting.