Tax season is upon us!
While April 15th isn’t a party for anyone, there a few things busy students can do to make paying income tax less stressful, whether you file your own or take your documents to an accountant. Since we’re just a month away from the tax deadline (at least so far), now is also great time to set up a good system for the coming year so you can breathe a sigh of relief next time you file.
Here are a few tips for keeping your tax documents ready to go:
Keep all your financial documents in a safe place, whether that be a lockbox, fireproof safe, or even a simple file folder or box in a secure area of your house. By creating a “home base” for your documents, you’ll know exactly where to put W2s, bank statements, or receipts throughout the year. When it’s time to do your taxes, all your documents will be ready for you (or your accountant).
It’s easy to ignore that growing stack of mail on the counter, but resist! When you walk in the door, go to your mail and sort it (right over the trash can if possible so you can throw away junk mail as you go). Anything that might pertain to taxes (like invoices or credit card statements) goes right into your tax document box. Not only will this system keep you organized for tax day, but it will also make your life so much easier if you ever get audited.
If organized numbers make you as happy as they make me , try making a simple spreadsheet to keep track of your expenses. In the short term, this might help you visualize where your money is going each month and benefit your budget. In the long term, some of these expenditures may be tax deductible or have a tax credit, such as certain kinds of environmentally-friendly home improvements, school expenses, or childcare costs. If you typically itemize your deductions, taking the time to write down deductible expenses as you go will save you loads of time when tax season rolls around.
Online banking and digital credit card statements make keeping track of income and deductible expenses easy, especially if you’re recording everything in a spreadsheet (see previous point). While it’s helpful to have printed copies of certain documents like W2s or 1099s (income received from non-employers), going digital will help you seamlessly pull what you need into a digital tax service like TurboTax. Around 90% of taxpayers currently file their taxes electronically with online services or software. E-filing is convenient, increases information security, often provides faster refunds than filing by mail, and is a lot cheaper than hiring a tax professional.
While it's true that e-filing on your own can save you money, it's never a bad idea to get a professional opinion on your taxes if you have any questions. Credentials definitely matter when it comes to entrusting someone with your financial information. If you’re going to pay someone to do your taxes, here are a few tips from the IRS to make sure you find someone reputable.
There are a few legal ways to reduce the amount of taxes you pay. Tax deductions reduce your total taxable income up front, while tax credits are subtracted from the taxes you owe to create a lower overall tax liability. If you take more of a DIY tax approach, you can research your eligibility for tax deductions and credits online, with resources such as this list of common tax deductions from Nerd Wallet. If you’re hiring someone to prepare your taxes, make sure to ask them if you’re a good candidate for itemized deductions or available tax credits.
The IRS recommends that you keep tax-related documents for at least 3 years in case of an audit. It is especially important to save income information and receipts that prove tax-deductible expenses if you typically get the itemized deduction rather than the standard deduction, or if you’re self-employed.
An easy way to keep track of receipts is the envelope system. Label envelopes with the name of each month of the year and fill each envelope with that month’s deductible expense receipts as you go along.
Curious how taxes impact you as an Accelerated Pathways student? Check out our post on taxes for online students for more specific tax information related to your college expenses or talk to one of our friendly student services advisors at email@example.com.
If Shelbie has a cup of tea, a good book, or a deep conversation, she is a happy camper. With a background in accounting, classical music, and blogging, she believes learning is one of life's greatest adventures.