Oh, boy. Taxes. If you're like many people, then you may already be feeling anxiety as you imagine paying the Internal Revenue Service or navigating the complicated process itself. The IRS estimates that the average American taxpayer spends 26 hours of time filing taxes. The good news is most Americans and University community members do not need to spend nearly that much time. There are a few things you can do to prepare and make your life easier - and there's a fair chance you will even find a pot of gold at the end of your tax-filing rainbow (i.e. get a refund check).
Tax basics \nIf you are an experienced tax-filer, feel free to skip to the next section. For many students, filing taxes is a fairly unknown process, and a basic primer will be helpful. For starters, we are talking about the income tax here, as opposed to the sales and restaurant taxes you are probably most familiar with, and the estate, gift and generation-skipping transfer taxes that you likely will not have to contend with for a long while. The federal income tax is the primary way the U.S. government raises revenue. Most Americans are required to file and pay taxes, and people typically pay taxes throughout the year, while working, by a process called withholding. This means that your employer withholds part of your salary for taxes and sends that money to the federal and state governments on your behalf. In part because of withholding, many people end up getting refunds when they file their taxes at the end of the year.
When to file \nApril 15 is the deadline for filing your tax return with the federal government, but there is no need to wait that long. As long as you have received all your tax documents (more below), you are ready to go; many people have already finished filing by now. You often will need to file a return for any state in which you worked or lived during the year, too; state deadlines are typically soon after the federal deadline. The deadline for Virginia this year is May 3, which is two days later this year than usual because May 1 falls on a Saturday. Generally, you should not wait until last minute to prepare and file your taxes. As with any term paper, procrastinating usually leads to trouble. If you are receiving a tax refund, you probably want to get that money back in your bank account as soon as possible. The IRS and most states will allow you to file for an extension in case you really cannot meet the deadline.
Key documents \nYou have probably already received most of the documents you will need to prepare your taxes. This includes a W-2 from any of your employers, which show your wage income and how much has been withheld. Other common forms you will receive are 1098 and 1099 forms, which are used to document interest income, dividend income, tuition, scholarships and more. You also could retain an expense log or receipts (if for example you are able to take a deduction for daycare expenses or charitable contributions).
Do I need to file? \nOne of the first questions you may have is whether you need to file at all. Most people do, but if your income was particularly low, then you may not be required to file. Regardless, you may want to file anyway. If your employer withheld any money for taxes, you could be eligible for a refund. The IRS has a link on its Web page (http://www.irs.gov/individuals/) called "Do You Need to File a Federal Income Tax Return?" where you can find for more information.
New for 2010 \nThere are many new tax laws every year. The stimulus bills contained a number of tax changes, a few of which are particularly noteworthy:\nAmerican Opportunity Credit: This is a new education credit to go along with many existing education credits and deductions. If you paid for education expenses last year, you may be eligible for tax savings.\nSales Tax Deduction for Vehicle Purchases: If you bought a new car last year from Feb. 17 to Dec. 31, then you may be eligible for a special one-time deduction.\nFirst
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