Every year, people dread doing their taxes before Tax Day on April 15. Students are no exception, but most of the problems lie in not knowing how to do the taxes rather than the actual difficulty. As students go out into the real world and begin to handle their own finances, here are some tips on how to complete taxes correctly and without fear:
What types of taxes do I need to file?
There are three different types of taxes: federal taxes, state taxes and local income taxes. Taxpayers should start with understanding what their place of residence requires to determine if they have local income taxes to file. “Cuyahoga County has local income taxes,” according to Tripp Petzel, Ph.D. However, Petzel explained “it shouldn’t impact many students. It really impacts full-time wage earners,” especially if they work in a different county than where they live.
What if I live in another state but work at JCU?
For state taxes, “you would file an Ohio non-resident tax return… and then you would file a resident tax return” in your resident state, Petzel said. Some states with similar tax rates have reciprocity, which allows the taxpayer to only file their non-resident tax return since they would pay a similar amount to their own state as they are doing in Ohio. However, if the resident state has a much higher tax rate, “you could be subject to additional tax in your home state,” Petzel said. His biggest piece of advice is to “check with your own state’s laws.”
What documents do I need and where do I get them?
“Any wage earner will get a W2 from their employer,” Petzel said. So, if you work at JCU or somewhere else where you earn a wage, you will receive a W2 in the mail.
“If you’re not an employee…you’re going to get a 1099,” Petzel explained. This document is different from a W2 because it means you have not had income taxes taken out of your paycheck, but “you’re subject to self-employment tax. You have to pay in for Social Security and Medicare,” said Petzel. “The benefit of doing that is… it starts your clock on your Social Security benefits when you retire” Petzel explained.
Finally, JCU students should have a 1098-T, which they can access through Banner under the Student Financial Services heading and the My Student Account page. This statement is a way to get money back for tuition payment and “will enable some education credits for you as well,” Petzel said.
How do I file taxes by myself?
For students, they can use Form 1040 on the IRS website and find their state’s forms online to complete their taxes manually, or use an online service such as TurboTax or TaxAct. Even accountants do not do their taxes completely on their own. “I use TurboTax because I don’t have a very complex tax structure,” Petzel said.
Why should I file taxes?
There is a good chance you will get a tax refund if you file taxes. “If you have a wage paying job, they’re withholding federal income tax from you. More times than not, the amount that they’re withholding is greater than the amount that’s calculated on your tax return, so you’re entitled to a refund,” Petzel said.
When your income taxes are first taken out when you receive a paycheck, income tax is already being withheld from you. This amount of tax taken out does not reflect an income tax amount that includes details about you as a taxpayer, such as any other jobs you work or your marital status. Petzel explained that the government is “doing their best guess at withholding” an income tax initially, but once you give the government more information, they will oftentimes give you money back based on the additional information you provide in the tax return. This means that the only way you can get money back that the government owes you is to file taxes.
It can be scary to file a tax return, but students should not be afraid of the IRS. Audits by the IRS are “being driven towards people who make large errors on their tax return” and if a mistake is made the IRS will most likely “negotiate a settlement with you,” according to Petzel.
Although there can be more specificity when it comes to certain taxes, hopefully this article has helped to take some of the “scaries” out of doing your own taxes.
