“What’s the big fuss over taxes?”
A friend asked me this and we ended up having an extended discussion about taxes. Not a fun topic, but nobody can escape the Tax Man.
When you’re in college your parents usually do your taxes or your taxes are really simple. Then as you go finish college, you’re a bit confused about taxes. You’re trying to figure out how to pay your rent or where to go on Friday night. The last thing you want to think about on a first date is taxes. However, you have to do your taxes. It’s mandatory and you could get yourself into some serious legal trouble if you avoid taxes.
You might even be thinking that you don’t make enough money or nobody ever told you that you had to do taxes. Those aren’t excuses to get out of taxes. Everyone has to file taxes.
I’m here to help you so that filing taxes is as painless as possible. Here are some important tax tips for young professionals that are filing taxes for the first time:
Keep all of your records.
You need to keep track of all your documents and hold on to them. I want you to keep this in mind when you receive mail from your employer, the bank, the company you invested in, or the government. These documents aren’t spam. You should have a folder with all of your tax documents. Even if you think a document isn’t relevant, I would hold on to it until you’re 100% confident that you don’t need it.
You must claim all of your income.
You have to claim all of the money that you make. So if you freelance, own a business, buy a rental, sell your crap, become a YouTube celebrity, or win a reality show, you need to claim this income. There are many loopholes, but you still need to claim the income on your taxes. Once you claim your income you can then look for credits and tax breaks.
You should take advantage of all credits.
There are many tax credits out there that you didn’t even know existed. Actually, I write about personal finance and I wasn’t aware of these credits until I spoke to a professional. Some quick examples include:
- Public transportation.
- Moving costs.
- Student loan interest.
There are other tax credits out there as well. Every governing body has its own unique and completely confusing tax system.
Most college graduates have student debt and they pay for this. While you’re likely not excited about paying interest on your loans, you can take advantage of the tax credits.
“If you owe $1,000 in interest per year, the credit could translate to about $220 in tax savings.”
Take advantage of those tax credits!
Explore retirement accounts.
There are many tax breaks that come with retirement accounts. The first place to get started is to find out what your current employer offers. Then you can look into creating your own retirement account.
This article will help you get started with the confusing world of taxes. The good news is that you can easily stay on top of your taxes. The bad news is that you still have to file your taxes.
“In this world nothing can be said to be certain, except death and taxes." -- Benjamin Franklin
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