Author Topic: Taxes  (Read 3624 times)

HydroJim

  • 5 O'Clock Shadow
  • *
  • Posts: 77
  • Age: 23
Taxes
« on: December 08, 2014, 06:16:25 PM »
Looking to do my taxes and maybe my mom's taxes this year. I just turned 18, she's 45, and we're both in school. I'm looking to maximize our returns and to learn how to do taxes. We both moved from Ohio to Tennessee this year so the state return might be a little confusing.

Does anybody have any tips or good text that I should read? I've begun google searching but if anybody here is more experienced, it would help.

Eric

  • Magnum Stache
  • ******
  • Posts: 4061
  • Location: On my bike
Re: Taxes
« Reply #1 on: December 08, 2014, 06:52:07 PM »
The best thing to read are the IRS instructions for whatever forms you're going to fill out (generally the 1040).  It's all spelled out right there.  While slightly dry, they usually explain things pretty well. 

Also, good for you!  More people should do their own taxes.  It builds character.  :)

DK

  • Stubble
  • **
  • Posts: 199
Re: Taxes
« Reply #2 on: December 08, 2014, 07:31:40 PM »
I'd recommend the first year do them through something like taxact. then print out your forms from that, and do them again by hand just to make sure you understand it and get the numbers right. next year just do them yourself.

MDM

  • Walrus Stache
  • *******
  • Posts: 9600
Re: Taxes
« Reply #3 on: December 08, 2014, 08:14:25 PM »
I'd recommend the first year do them through something like taxact. then print out your forms from that, and do them again by hand just to make sure you understand it and get the numbers right. next year just do them yourself.
+1 (and to Eric's comment).  Part-year resident state tax returns can be tricky for a first-timer.  And it is good to have a "known correct" set of numbers for comparison.

One thing to consider: create your own spreadsheet with "a few" columns for each year.  We started with one column per year, and it was actually the part-year state returns that caused us to expand to three columns: total, included, and excluded for the state(s) in question.

Anyway, having your own 1040, Schedule A, etc. spreadsheet allows you to compare year-to-year numbers quickly, calculate withholding exemptions accurately, etc.

johnny847

  • Magnum Stache
  • ******
  • Posts: 3196
    • My Blog
Re: Taxes
« Reply #4 on: December 08, 2014, 11:03:40 PM »
I'd recommend the first year do them through something like taxact. then print out your forms from that, and do them again by hand just to make sure you understand it and get the numbers right. next year just do them yourself.
I'd actually reverse the order - do it by hand first, then run the software. If you run the tax software first, it's easy to fall into the trap of thinking that the tax software is 100% correct and optimal. Your tax software can become a crutch. If you start with pencil and paper first, you're more likely to gain a better understanding of the tax code. Also, it is possible, though highly unlikely, that there is a bug in the software.

Also, I should note that there exist situations where minimizing your federal taxes can increase your state taxes. I encountered this myself as a student (it involved a fellowship and the lifetime learning credit - I could explain if somebody would like, but the details are not all that meaningful to this discussion). Some tax software may try to optimize your overall tax bill of federal + state, but some may not. I know for a fact that when I tried H&R Block online, it did not do this, as it would refuse to let me fill out my state tax forms without first submitting the federal forms to the IRS.

Start with federal first for two reasons:
1) Most state returns rely on you having figured out your AGI from your federal
2) Having lived in multiple states in one year can be tricky.

TerriM

  • Pencil Stache
  • ****
  • Posts: 507
Re: Taxes
« Reply #5 on: December 08, 2014, 11:18:08 PM »
I definitely recommend using the software.  It makes things sooooooo much easier unless you're doing a 1040EZ in which case it's a waste.   I no longer stress about signing my name on the bottom saying everything is correct.  We've been using HRBlock's software (Taxcut?) for the last couple of years, and Quicken's version before that, but they're all probably fine.

It also makes it easier to play with situations where you do separate taxes vs. her claiming you as a dependent. You can run different scenarios and save them to different files.

FarmerPete

  • Bristles
  • ***
  • Posts: 346
Re: Taxes
« Reply #6 on: December 09, 2014, 10:15:33 AM »
I've done my own taxes since I graduated college.  I've always used TurboTax, because that's what my dad buys.  I go to his house and do it on his computer.  No sense in both of us paying for the software.  I also only e-File the returns that are free.  Normally that means I have to mail in my state returns.  It costs like a dollar for postage and is better than paying $20 to e-File IMHO.  The software makes it crazy easy, unless you've got some really weird situation.

SomedayStache

  • Pencil Stache
  • ****
  • Posts: 761
  • Live Long and Prosper
Re: Taxes
« Reply #7 on: December 09, 2014, 03:08:26 PM »
I do my taxes by hand first.

Then go to TurboTax online and do my taxes there.  You do not pay for TurboTax until you actually e-file.  Therefore I use it only to check my work.  If I get the same numbers both ways I figure I am good.  If not-I investigate and figure out why.

I then use the IRS free-fillable forms to e-file my federal taxes for free. 

TurboTax still retains my records for the previous years - even though I've never actually filed through them.  So I can even compare back to what I did last year.  I don't imagine TurboTax will ever close this loop-hole because it's actually quite a bit of effort to enter all that info and then not file.

In your situation your income is probably low enough that you can use TurboTax for free (or your choice of other software).  Google IRS FreeFile.  The income limit was $58,000 last year.

The state returns are a little clunkier - but also usually quite a bit simpler.  I did multi-state returns when I was your age and moving around for school/graduation - if you can do math (ie take a percentage) and follow directions you will be fine.

HydroJim

  • 5 O'Clock Shadow
  • *
  • Posts: 77
  • Age: 23
Re: Taxes
« Reply #8 on: December 11, 2014, 10:27:39 AM »
Thanks for all the great advice! I'm excited to get started and see how i can do.

One last question. If I would like to itemize during the year of 2015, what do I need to do? What is the point? Why do people itemize?

TN_Steve

  • Bristles
  • ***
  • Posts: 257
  • Age: 59
  • Location: fly-over country
Re: Taxes
« Reply #9 on: December 11, 2014, 11:45:58 AM »
Thanks for all the great advice! I'm excited to get started and see how i can do.

One last question. If I would like to itemize during the year of 2015, what do I need to do? What is the point? Why do people itemize?

People itemize if their itemized deductions are greater than the standard deduction.  I'm guessing that won't apply to you at your age (and student status).

Re:   State taxes.  Tennessee doesn't tax wage income or capital gains.  Its "Hall tax" only applies to dividend and interest income (but at 6% after a low floor).  Very easy to do that return online at the Tennessee Department of Revenue site, assuming that you have the need to do so.  See  here:  http://www.tn.gov/revenue/tntaxes/indinc.shtml