We Skimm'd more taxes topics for you...
So you have to fill out your tax return (the form with your income and personal deets).
What will be on it?
Here are some terms you'll probably see...
Exemptions: A tax discount you can get off the bat for just being you. You can get more by having plus ones you’re responsible for, also known as...
Dependents: People you’re financially supporting. Think: kids, or parents and grandparents you’re taking care of.
Deductions: When the gov cuts you a break for some things, and gives you discounts on your taxes. There are two types: standard or itemized.
Standard: Nice and easy. You get a flat-rate discount based on three things: if you’re single (smallest discount), if you’re what’s called the head of a household (medium-size), or if you’re married (heyyy $$$). Pros: simple, no extra work, and the IRS pinky promises not to ask for all your receipts if they audit you. Cons: depending on your situation, you could be missing out on itemized deductions that save you cash money.
Itemized: Trying to pick up all the deductions you can. You get ‘em for a wide range of things like giving to charity, large medical expenses, unreimbursed work expenses, or having to pay mortgage or real estate taxes on your home. If you do the math, and the itemized deductions are more than the standard deduction, you could end up saving a lot of dolla bills.
What happens next?
Once you decide between standard or itemized, time to figure out how much you owe. You take the money you made, subtract the deductions, and voila: your taxable income. It puts you in a specific tax bracket. If you’re in a higher bracket – you pay a higher percentage in taxes.
I'm married. How do I file?
If you and your SO got hitched before the end of the last tax year, you have two options. You can file together (joint) or solo (separate).
Joint: When two becomes one. And you pool your money together. Income, minus deductions (standard or itemized) equals your collective taxable income. That puts you in a certain tax bracket. People filing together have different bracket thresholds than single filers. Pros: joint filers can often get a better deal...just for being married.
Separate: Shout out to those going it alone. Even if you're married, filing separately could be a way to save some cash...sometimes. Like if one of you has big medical expenses. The rules get tricky and it depends on your personal situation, so look into it if you think there’s a chance you could save.
Is that it?
Almost. There are a few numbers to know. Like your social security number, obviously. Plus some others you don’t hear every day....
IP PIN: Identity Protection Personal Identification Number. This is the IRS’s way of protecting you from identity theft. If you filled out last year’s taxes, check that return to find this. If you don’t know what yours is, ping the IRS here.
EIN: Employer Identification Number, or how the IRS keeps track of your company. If you’re running your own biz, make sure you get one of these. If you’re getting a W-2, look for that number, and copy-paste into your 1040. Done and done.
The more you know how to file and what you can deduct, the more you can potentially get back from the Tax Man. Start here and good luck.*
*PS: This is an affiliate partner, which means if you buy anything, theSkimm may get some cash money. Thanks.
Subscribe to Skimm Money
Your source for the biggest financial headlines and trends, and how they affect your wallet.