The spotlight’s been on taxes this past year, but I’m not convinced that people have given their own taxes the same level of consideration that they’ve given to our politicians’ taxes – which I’m sure are on the up-and-up. Right?
So many of my friends and coworkers tell me that, to this day, they hand their W-2s over to their parents, and “let” them handle their taxes. While I’m sure their parents must love that their kids still have such a
crippling dependence strong bond, there’s no excuse.
Thanks to all of the (free!) tax software out there, it’s ridiculously easy these days to file our taxes. So easy, in fact, that writing a how-to on actually filing simple taxes would come down to “find the software, do the thing.” Instead, maybe it’s worth considering how to set ourselves up so that tax season doesn’t feel like a hit and run.
Personally, I’m not the kind of girl that only considers taxes in April. I think of them every time I get a raise or a new job. When my income changes, so does my tax situation, and filling out those pesky W-4s at work is only beneficial if I know what my bill should look like at the end of the year.
That’s one of the nice things about a 9-to-5: my income is fairly predictable. I know that, if nothing else changes, by the end of the year I’ll have made exactly my salary. I also know that, if all goes well, I’ll probably have maxed out my IRA by the end of the year, which is $5,500 off my taxable income (woo!).
With the help of online tax calculators like Smart Asset and the one direct from the IRS, I’ll double check and adjust my withholdings whenever my income changes, or mid-year if there’s nothing new to report. If I’m paying too much or too little with every paycheck, I’ll change my withholdings. This way, I never owe a huge amount by the end of the year (and the IRS isn’t getting an interest-free loan).
Assuming you don’t have real estate or own a business, this really only gets complicated when your income situation changes, or when you have to account for multiple streams of income… If only you could track all of these changes in some sort of, oh, I don’t know, handy spreadsheet tool, where all you’d need to do is update the highlighted cells to see how you’re doing, tax-wise…
The only other thing I’ll do year-round is mark my tax-related expenses in Mint. For example, all medical expenses and donations are clearly labeled and tagged. By the end of the year, I can just check the Trends tab for that tag and see the total costs right there, instead of having to think back and break out the calculator.
By the time February rolls around and I have all of my W2s and 1099s in hand, nothing is a surprise.
Which brings me to tax filing software. I’ve used a few of them in the past, but I still find myself going to TurboTax year after year because it’s really user-friendly, but also because state and federal filing with them is completely free. If all you have to worry about is a W-2 (or three) and a handful of 1099s, they walk you through every step of the way. It takes all of a half hour, if even that, and you can’t really fuck it up unless you’re actively trying. Then boom, you get your refund.
Obviously, if you have a house and kids and all of the finicky things that affect your tax bill, it’s probably worth it to see a good CPA. But as a single millennial, I’ll do it myself unless someone can prove that they’ll save me more on my tax bill than I’d pay them. Either way, our parents have enough going on without having to worry about their adult child’s taxes.
My favorite free financial tool I use is M1 Finance. I've previously written about M1's free trades, automatic rebalancing, and easy-to-use interface, but it really does make investing accessible and easy. If you're not already investing in some way, or if you're looking for a tool that makes it easy to manage, I recommend trying it out.
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