Help with taxes (first time to do it)

LEDagent

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Jeez...i feel so embarassed..

I was reading Polak187's post about filling out his W4 form and it got me thinkin'..... "I don't know how to do my taxes."

I'm 23 years old, i'm working my first full-time, taxable job, and my parents have always taken care of me financially until now. I still live at home and I'm trying to be more independant by paying for things that my parents use to take care of. I feel so spoiled...but i've got to start my independance NOW, instead of being shoved out into the real world a few years from now...and not knowing what to do.

Anyway...how the heck do you file income tax? I hear about it, and NOBODY has ever told me about it, nor have I hever looked into it. My parents get s theirs done by a pro, so they never tell me anything usefull around this time. Please explain it to me as if i'm from another planet because (shamefullY) i don't even know what it's perpose is for and (even more shamefully), I don't even know what all this money deducted from my paycheck is used for.

For example, what's this Fenderal Income tax taking 80 dollars or so every pay period? Or Social Security Tax (I know a little about this), Medicare, CA State Income Tax taking about 15 dollars, and CA SUI/SDI Tax?

I feel so bad that people are taking money from my pay check (up to 250 during some pay periods), and i don't even know where they are going. I hear people saying "Oh i'm gonna spend my income tax money when i get it." Are you saying that i can get all that back? HOW?!

This is my first taxable job. I use to work for a non profit, so the money i earned is the money i kept. Now the money i earned is being deducted up to 200 dollars every 2 weeks. So i'm scratching my head saying "what gives"? I'm not upset about this because MILLIONS of other people are doing this...i'm just late in the game is all. I feel like those rich spoiled people on TV that everyone (even me) laugh at. When something so obvious for us regular people stump them, it's funny. So feel free to laugh at me...but not too hard. I'm tryin' to learn.

Please help me understand this tax bussiness. What do i do at tax period? Help me understand the terminology before i get in trouble later on. Are there any online sites that can help someone like me?
 

LEDagent

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Oh...here are other things that i've been doing just to let you know. I haven't been saving my receipts for alot of my purchases. This is REALLY bad i know. I've got to fing a way to file my reciepts because i have a BAD habit of throwing them away. They're all small stuff like gas and food, but it's bad that i don't keep them anyway.

Just letting you know just in case this is an integral part of doing your taxes. If it is....then i'm screwed. /ubbthreads/images/graemlins/eek.gif
 

James S

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LED Agent. Don't worry about receipts and things. The way it works at least for people with relatively simple lives (no capital gains, no stock sales or corporate dividends, no sizable income that hasn't had taxes removed from it yet) and that sort of thing) you can probably get away with a 1040ez form.

it's only 1 page, and it will still take you 45 minutes or so to fill out, and it won't make any sense, but you can do it yourself and you can do it right. Anything more complicated and I'd really recommend getting someone to do it for you.

Receipts and the like are only useful if you're going to itemize EVERYTHING. it doesn't make sense for most folks to itemize as the standard deduction will be bigger than what you'd get by itemizing.

Good Luck

PS, ours have gotten so farging complicated in the last few years that I'm now paying someone an ungodly amount of money to do them each year. But it's worth every penny beyond a certain point.
 

greenLED

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Ditto on what James says. We pay a tax specialist to do our taxes. Since we started doing this, we've actually gotten money back! It's worth every penny IMO.
 

Saaby

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LEDAgent, I'm in the same boat as you /ubbthreads/images/graemlins/duh2.gif

I asked James the same question and he gave me the same response. /ubbthreads/images/graemlins/grinser2.gif

I will probably be able to go the 1040ez route this year. I might try some Tax software just so I can say I did it. It's gotta be worth the learning experience right?
 

StuU

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Ledagent- there is not much to doing basic tax. It only gets complicated when you itemize ie mortgage deduction, medical expenses. Or if you are in your own small business and file a schedule C.

You might try a professional tax prep service the first year. Look over their work and you will see how simple basic filing is. You will probably be able to do it yourself the next year by using that return as a model....the basic rules generally don't change much year to year. However, it's good to go through the tax instruction book as you fill out the form just to be sure.
 

K A

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I used to use a Free web based Income Tax forms by Intuit (Company that makes Turbo Tax and Quicken). They are part of a Tax Freedom Project that allows you to file Federal/State income tax for free if you meet the requirements.

I didn't meet their requirements last year but I found H&R Block would let me do my Federal Income Tax for free and I could file my State Income tax online seperately for free as well.

The IRS Keeps a list of companies that allow free E-Filing for individuals.

http://www.irs.gov/efile/index.html
 

CNC Dan

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[ QUOTE ]
LEDagent said:Please explain it to me as if i'm from another planet because (shamefullY) i don't even know what it's perpose is for and (even more shamefully), I don't even know what all this money deducted from my paycheck is used for.


[/ QUOTE ]

You know that nice road road you have infront of your house. Your taxes will help pay for that. You know those guy that lock up the bad guys. Your taxes pay for their training and pay. And so on.

As far as the deductions on your paycheck, that is an estamate of what you will owe in taxes. The govt. doesn't want to wait untill the end of the year. Turns out a lot of people would spend everything they made. So, they take it out of your pay every week. They usualy take more than they should, so at the end of the year you get a tax refund. (Woo Hoo) Your employer has you fill out a W-4 form with your information. This is used to determine how much to take every week.

At the end of the year, you will get a W-2 form from your employer. This will show how much you made, how much the Govt. took and such.
The areas on the W-2 form are numbered (box 1, Box 2, etc). On your tax return form, you will fill out information from those boxes.

IE "enter the dollar amount from box 1 here"

You can do a "questions and answers" online tax return, or go to H+R block and such.

Hope this helps.

Dan
 

gadget_lover

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Does the post office still have the tax return booklets? If so, pick one up and read it.

The booklet explains the whole process. It leads you through every step and has pretty good explanations for every term.

Many people get money back, but not all of them. You may find that you owe a little. You should fins that out now in case you need to set aside money to make that payment.

Dispite what you'll hear, everyone pays some taxes. The more you make, the higher percentage will be taken. By the time you start making over $150,000 per year the gov will get 50 cents out of every dollar (state, local and other taxes). Rich people sometimes spend or loose great deals of money on things the government want, and get credit for doing do. That's why you'll see headlines reading "millionare pays $50 in taxes".

Don't ever let enyone tell you that you will lose money by working overtime or getting a raise. The taxes with-held may go up when you work 80 hours in one week, but that's based on the (incorrect) assumtion that you work that much every week. You get the extra back when you file your taxes.


Daniel
 

double_r76

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[ QUOTE ]
LEDagent said:
I'm 23 years old, i'm working my first full-time, taxable job, and my parents have always taken care of me financially until now.

This is my first taxable job. I use to work for a non profit, so the money i earned is the money i kept. Now the money i earned is being deducted up to 200 dollars every 2 weeks.

Please help me understand this tax bussiness.

[/ QUOTE ]

I've got a BS in Accounting and have worked as a pro-bono tax-preparer in the past... here's my take.

Mentioning that this is your first taxable job is your first misconception. Any income you receive from doing any work should be reported to the IRS, according to the law. This includes part-time work. Also, working for a non-profit organization does not mean that your personal income is exempt from federal income tax. Basically, if you receive any money for doing something, then it is the IRS's business. In the past you may have been paid "under the table" where nothing was reported to this IRS by your employer, therefore no withholdings were made from your pay. This is illegal, but don't worry, it usually never discovered (unless posted in public forums that are frequented by IRS Special Agents).

I suggest you find someone you trust that is financially savvy to help you with your taxes, they are not hard to do since your situation seems simple. If you don't have anyone that is knowledgeable and trustworthy, head down to a local tax-preparation service and have them explain everything they are doing while you are there. After all, you are paying them for their service... ask questions if you don't understand something.

-Randy
 

Glenn

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The best way to understand it AND BE FAIRLY SURE THAT YOU ARE RIGHT:
Is to do it the "old way" with the paper forms and then purchase Turbo Tax and do it the EASY WAY.
See if they agree.

I have accounting training and had been doing it on paper until about 5 years ago when bought Turbo Tax.

IT IS A GREAT TIME/HEADACHE SAVER.

Glenn
 

Sierra_Bill

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Hi Laurence,

Some of this is repetition of what others have said, but I want to put a summary of what I have to say in one place.

1. As others have noted, you probably can use the one-page form 1040EZ, which really is easy. I always did until I had enough interest (over $400/year) to require form 1040A, and then form 1040 after I bought a house and began to itemize deductions.

Form 1040EZ really is easy. You just enter a few pieces of information like wages (off your W-2), bank account interest (you'll get a form from each bank), etc. (Form 1040EZ is only for those who have simple kinds of income and deductions.) Once you get to the right place in the form, you enter the taxes due on your income which you get from the tax tables in the IRS tax booklet. Then you compare what you paid and what you owe for the year to determine whether you get a refund or owe some more. If your income is pretty much just wages and the employer withheld taxes, you probably won't owe anything or maybe just a few dollars.

2. California state taxes are similar (yes, you also need to file a tax return with the state Francise Tax Board, the state equivalent of the IRS). You have to do your federal taxes first before you start your California state form because the state form requires info (adjusted gross income) calculated on the federal form. California has form 540 EZ which is the state equivalent of the federal form 1040EZ.

3. [ QUOTE ]
LEDagent said:

For example, what's this Fenderal Income tax taking 80 dollars or so every pay period? Or Social Security Tax (I know a little about this), Medicare, CA State Income Tax taking about 15 dollars, and CA SUI/SDI Tax?

[/ QUOTE ]

The federal tax is the federal income tax, the primary revenue source for the federal government. FICA is what you pay towards Social Security and Medicare coverage. Remember, those programs can also cover the disabled, not just retirees. The state income tax is the primary revenue source for the California state government. SDI tax is for state disability insurance in case you become temporarily disabled due to a non-occupational cause (if you get injured at work you may get worker's compensation which employers pay taxes towards).

Hope this helps.

Oh, for the days when filing taxes was simple! On the other hand, think I'll keep my house and the mortgage interest deduction. There are rewards for being older! :)))

Bill D.
 

Samoan

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Some of the tax software is also a big winner in that it will alert you to issues on your return that could flag an audit (even tho audits are becoming less and less common).

As to working for the non-profit. They still owed you at the very least a 1099. If you have any income, its taxable.

One last thing. There is the possibility you may still be worth more (in the overall scheme of things) as a dependent on your parent's return in which case all the advice here is moot.
 

GJW

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[ QUOTE ]
Samoan said:
One last thing. There is the possibility you may still be worth more (in the overall scheme of things) as a dependent on your parent's return in which case all the advice here is moot.

[/ QUOTE ]

Not sure about the moot part.....
Even as a dependant he still has to file if he had taxable income.
 

cobb

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i too am in the same boat. I just asked my parents and they said you just fill out some forms and get a few from your employer. You dont need to visit H&R block. You can mail it in from Jan to April, not just the day before April 15.

My problem is, I assumed a part time job was going to be short lived and pay less than 4 grand. Well, Ive made almost 6 and put down I did not plan to make as much and was disabled/blind. So, I am likely to owe some. True 40% of my commissions are withheld, so maybe that will balance out?

Anyone know if you can charge what you owe to the irs? I maybe unemployed and a few grand deeper in debt by then.
 

GCalifornianus

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You can pay any additional tax you may owe to the IRS with a credit card. You can probably also e-file even if you don't have tax preparation software (see www.irs.gov for further info on both). I've never filed electronically; at some point I probably will switch over for good and then wonder why I waited so long. Also, if you're owed a refund of previously-withheld tax, it has historically been advantageous to file before April, because the volume of returns starts to go up as the deadline approaches.
 

Lurker

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Your parents may not file their own taxes, but they can certainly walk you through your first time. If the IRS sends you the booklet with the forms inside, then it is simply a matter of reading it and following the directions. If you get no booklet, then you have to hunt that down. I would start at www.irs.gov. You should be aware that most people have to file once for the Federal Government and then file a different form for their State Government. Some even file for the city, I think, such as New York City residents, but this is rare.

Don't be intimidated. Some of it is confusing, but that is mostly because it is all over-simplified to the point that it no longer makes sense. Just follow each step exactly and it will come out in the end. If you receive any mail in the next 30 days that is clearly marked on the outside of the envelope "Importnat tax information enclosed" be sure to save it. You will need it for filing. These might come from your bank if you have earned any interest on a savings account for example, and of course from your employer reporting your wages.

Don't worry about receipts. You will not need any.
 

cobb

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I checked with my co worker. They take the same amount out of his check, 37 bucks for about 180 bucks earned. I was worried they were not taking out enough because they took out doubled at first til I turned in the tax form.
 
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