Tax Guide Updated for 2013
Disclaimer: I am not a tax professional and this is not personal tax advice or tax advice of any kind. Please seek the help of a tax professional for your personal situation. Information is sourced from IRS.gov with reference links provided as well. Tax law changes each year and you should be aware of how those changes affect your personal tax situation.
Do I have to file taxes?
Whether you must file a federal income tax return depends on your gross income, your filing status, your age, and whether you are a dependent.
If you are an unmarried dependent student, you must file a tax return if your earned and/or unearned income exceeds certain limits. Unearned income includes interest, dividends and capital gains. Most likely you can file the simplest tax form, the 1040EZ and simply enter your income and wages. See Publication 501 to find out if you have to file.
If you are younger than the age of 65 and not blind, you must file a return if any of the following apply.
- Your unearned income was more than $950.
- Your earned income was more than $5,800.
- Your gross income was more than the larger of —
- $950, or Your earned income (up to $5,500) plus $300.
When is it too late to file my taxes?
You must file your taxes or request an extension by April 15th each year. This date could change by a day or two depending on if it falls on a weekend. Check the IRS website for filing deadlines. The deadline for filing 2012 taxes is April 15th, 2013.
What records do I need to file my taxes?
In order to file your taxes, you will need your tax form, this will typically be a 1040EZ for the simplest filing. You will also need income stubs or an employer generated W-2, and/or a 1099-MISC.
What is the difference between a deduction and a credit?
A deduction reduces the tax burden while a credit subtracts directly from the taxes owed. A deduction cannot be paid back to you but only reduces your taxable income. A credit could come directly back to you in the form of a refund depending on the amount of taxes you owe.
Are there special deductions or credits for students?
Some college students are eligible for Education Tax Credits, while others will be eligible for a tax deduction based on education spending.
American Opportunity Credit: This was set to expire at the end of 2010 but was extended for an additional two years through December 2012 by the Tax Relief and Job Creation Act of 2010. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels.
If you do not qualify for the American Opportunity Credit, you may qualify for the Lifetime Learning Credit. You cannot take the American Opportunity Credit and the Lifetime Learning Credit for the same student in the same year.
Lifetime Learning Credits: This credit can help pay for undergraduate, graduate and professional degree courses – including courses to improve job skills – regardless of the number of years in the program. Eligible taxpayers may qualify for up to $2,000 – $4,000 if a student in a Midwestern disaster area – per tax return.
Tuition and fees deduction: Students and their parents may be able to deduct qualified college tuition and related expenses of up to $4,000. This deduction is an adjustment to income, which means the deduction will reduce the amount of your income subject to tax. The Tuition and Fees Deduction may be beneficial to you if you do not qualify for the American opportunity, Hope, or lifetime learning credits.
(TurboTax will automatically run an analysis to determine what you qualify for that would give you the biggest credit or deduction.)
How much tax do I have to pay?
The amount of income that you generate in a tax year will determine the amount of tax that you owe after adjusted for deductions and credits. The Standard Deduction is a dollar amount that reduces the amount of income on which you are taxed. If no one can claim you, the standard deduction for the 2012 tax year, is $5,950. Take this quick quiz to determine if you qualify for a higher standard deduction.
What if I did not receive a W-2?
Sometimes an employer will delay sending the W-2, which is the form you need to file your taxes. They are legally required to put it in the mail by the last day of January so you should receive it soon after.
If I want to take my taxes to someone else to get them done, what are my options?
You have several options if you do not want to file your taxes on your own. One option is to take your paperwork to a tax accountant and have them file for you. This can often be a costly option because a tax accountant will usually charge for each form filed. Another option is to visit a branded tax office like an H&R Block or Liberty Tax Service. These offices typically have staff that are trained to ask the right questions to help you get the largest tax refund. However, they typically use an online software to ask these questions and you get charged for the in person visit.
The same online software is available to you as well. I use TurboTax to do my taxes and the software is very easy to use. The software guides me through a series of questions to determine what deductions and credits I am eligible for. It guides just like a GPS does. I’ve been using Turbo Tax for several years now and I use it to file my business taxes as well. Check here for the latest Turbo Tax coupon code.
More questions on taxes? Try the Interactive Tax Assistant at the IRS website.