5 Things You THINK You Know About Taxes but Don’t
I like using steps for anything I try to accomplish, especially in the realm of money stuff, because it prevents you from having an anxiety attack when you don't accomplish everything all in one day. Like with learning any new skill, things need to be broken down into steps so that you're doing one thing at a time. When I did my taxes for the first time, I didn't set aside one day to do them. I set aside an entire month. Day one: un-crinkle my receipts. That was it. Success! If I had told myself I needed to sit down and do all my taxes and not get up until they were done, I would have panicked and found myself on the couch with a pint of Häagen-Dazs, taxes incomplete.
This is not going to happen to you on my watch. Baby steps. Here are five common questions that are often misunderstood. So here they are answered once and for all to help you get most out of your taxes AND maintain your sanity.
- "What's the first day and the last day I can turn them in?" The IRS began accepting individual returns on January 19, 2016, and some people have already gotten their refunds back. The last possible day you can turn in your taxes is October 15, 2016 — but only if you file an extension by April 15, 2016. Otherwise, April 15 is your drop-dead day. With e-filing and direct deposit, it's faster than ever to get from filing to accepting that big ol' check — and you can track the whole process online with the "Where's My Refund?" tool here.
- "Should I use TurboTax?" (No affiliation.) Yes, because you can. If you're single and not claiming any dependents, filing your federal taxes (1040EZ) with TurboTax is simple, and in most cases won't cost a thing. You have to pay a small fee for filing your state taxes, but it's well worth it, especially since free e-file is included (and you can pay the fee using part of your refund, so there's literally no need for a credit card in sight.) With its step-by-step process and easy access to support you can't get stuck. Bonus: Have you filed with TurboTax before? Well, the system remembers all filings from years past, and since a lot of the information rolls over, just log in again this year and your taxes will be a snap.
- "What do I need to get together?" 1. As your tax forms come in the mail or become accessible online, start saving them in a folder on your computer. (Unless you've opened a new bank account, retirement vehicle, or stock account you should have the same forms as last year. Using your prior year tax return serves as a great benchmark.) 2. Cross-check or make a list (if new to filing) of all jobs, bank accounts, stocks traded/held (1099-INT forms), properties, and anything you make payments on (mortgage, student loans, extensive doctors bills, etc.).
- "Can I get any tax love from my student loans?" Hell, yes. You heard right: something good can come from your student loan payments. If you're paying down student loans, you're usually paying off interest which is tax deductible. Tax deductible is a fancy way of saying that it helps reduce the amount of money that Uncle Sam takes a percentage of. So, the less money you claim, the less money in taxes you pay. Remember: reducing your tax liability is a good thing.
- "Should I itemize or not itemize?" Don't itemize. Unless you own multiple properties, contribute a large chunk of change to charities, and/or have medical expenses that exceed 7.5 percent of your income, go standard and don't look back.
Nicole Lapin is a veteran financial journalist, serving as an anchor on CNN, CNBC, and Bloomberg. Her first book, Rich B*tch: A Simple 12-Step Plan For Getting Your Financial Life Together . . . Finally, came out this year. You can follow Nicole on Facebook, Instagram, Twitter, and at NicoleLapin.com for smart financial advice and unconventional money tips.