Session 6: Taxes

Happy lunar new year everyone! Don't be alarmed that we went from session 2 to session 6. I did not forget how to count to 10. There are drafts of sessions 3, 4, and 5 and they will be up eventually, but I wanted to skip ahead and cover the basics of filing your own taxes first, since it is everybody's favorite time of year. Tax season!

Having (barely) survived the Polar Deathtrap Vortexes of Hell, I think I'm starting to understand why taxes are filed during the first few months of the year. No one has anything better to do because we're too sluggish and cold to go outside. Fortunately, authoring blog posts is also an indoor kind of thing, so I've productively spent my time watching k-dramas and cobbling together a guideline to help you file your own taxes this year. (But not actually doing my own taxes yet, because this is how I procrastinate. Do not follow my example.)

Remember, your priorities should be to:
1. Avoid getting audited or penalized later (AKA do it right, don't make mistakes)
2. Maximize your tax return

This is how I feel, often. 

 Source: CSlacker

CAVEAT
I realize this post does not apply to everyone, but many of you will be filing as an independent for perhaps the first time. It's a little nerve wracking and intimidating and I am not ashamed to admit that I happily agreed to let our family accountant file my taxes for me in 2009 and 2010.
Sadly, after I graduated, I got kicked off the family tax account (and the family cell phone plan, wtf!!!)

I could have hired a tax professional to help me do my taxes in 2011 (and was sorely tempted to do so, given how little time I felt I had). However, I've always been told that it's important to do your own taxes for at least the first few years that you earn a reportable income, just so that you understand what's going on. So I bit the bullet and carved out a Saturday to figure out my taxes. I recommend you do the same. The good news is that it gets progressively easier each year!

 Thank goodness we're allowed to file taxes online. In the old days, you had to actually 

use a calculator and write that stuff out in pen. Lord help you if you screwed up.

Source: She Knows

Outline and Summary
Important Dates and Deadlines
Information Security
Before You File
Filing Your Taxes
After You File

Important Dates and Deadlines

• Taxes are due for most of us on April 15th.
• If you need to file for an extension, you must submit your request by April 11th. Keep in mind that this is just an extension for filing, NOT for payment of taxes. If you owe taxes, they must still be paid by April 15th.
• If you receive a filing extension, you must file your taxes by October 15th.
• Businesses (e.g. banks, your employer) are required to mail their tax forms to you by January 30th. Make sure your addresses are up to date.

Common sentiments around April 15.
Source: Charles M. Schulz via Janet Rudolph's blog

Information Security
As you prepare your taxes, you'll be handling a lot of very sensitive information. Some tips to ensure all that information stays safe:

1. Make sure you have a secure Internet connection.  Honestly, I'm not very tech savvy, so I'm not sure what the best method is. However, I've turned off all file sharing, put up a firewall, and I make sure that I'm using my password protected home internet connection whenever I'm handling sensitive information. Do NOT use a public internet connection (e.g. wifi in an airport).
2. Do not write down your SSN or give it out unless you absolutely must. If you have documents with your personal information on it, including a SSN, you MUST shred that shit when you throw it away. Don't ever email your SSN to anyone, even to people you trust. Emails can easily be intercepted and hacked. 
3. When you log into financial websites (e.g. student loan sites, bank sites, tax filing software sites), make sure the web address is secured (https instead of http). Make sure you don't fall for a fake website (phishing). Be alert and on your guard when logging in.
4. FILE YOUR TAXES EARLY. For all the procrastinators out there, let this be a fire-under-butt motivator to get your taxes done ASAP. After all, if you file early, you get your refund before someone else has the chance to steal it away. 
5. Strong passwords! This picture says it all.

Just make sure you don't forget your strong passwords.
Also, 0000000 is not a strong password. Neither is qwerty12345. Sorry.
Source: Mindful Security

Why is this important? If someone gets a hold of your information, they can do a lot of damage. Personal identity theft is a real problem and you could be liable for monetary damages with far-reaching consequences or you could suffer from lower credit scores. It might be possible to detangle the mess, but it's a huge legal headache and one we're better off avoiding altogether.

Tax related identity theft is far more prevalent than people expect. This is a good article to read: Beware of Gangsters Filing Tax Returns. 

I'll leave you all with a hypothetical example. If someone walking past you on the street snatched your purse, what would you do? Would you just stand there and be like, "Excuse me, sir, but that's actually mine. Could you be so kind as to return it?" HELL NAW!!! You're gonna chase after the dirty little thief and pounce on them from behind in a super-sneak-attack and snatch your motherfuckin property right back! Unless they have a gun, in which case I'd say just let it go. So if you're going to raise a ruckus over a stolen purse, you better be equally as fussy about someone trying to steal your personal identity. I mean, c'mon, a purse, credit cards, ID - these you can replace fairly easily (maybe not the ID, depending on how your state runs their DMV). But you? Honey, you're irreplaceable. Don't let anyone tell you otherwise! Fight to keep your identity intact! Rawr!! Okay, sassy time over.

Be this girl. 

Before You File
With taxes, as with many things in life, such as zombie attacks, preparation is half the battle.

Gives new meaning to the phrase "Getting off the treadmill of life"
Source: The Horror Honeys

First, look at your calendar and carve out a few hours or even a full day in February and reserve it for some bonding time with Uncle Sam. Before your special day, take some time (in January!) to figure out what forms you should expect to receive. A good way to do that is to list out all the income sources, accounts, and loans that you have and check to see what kind of forms are issued for each. Collect those and any other items you'll need. You'll find that this saves you a lot of headache later on and will reduce the number of errors you make. I've put together an example checklist below, but keep in mind that this is based on my own experience. Please adjust your list as necessary.

Things You Might Need to File Your Taxes

• Computer with internet (Important. Try to stay off fb.)
• Notepad and pencil (post-its, if you have them)
• A folder, to store all your documents in
• Tax filing software* (TaxSlayer, TurboTax, H&R Block etc.)
• Forms (some common forms are listed below)
• W-2 form from each of your employer(s)
• 1099 forms if you earned any type of income outside of your job. Some specific examples are listed below:
• 1099-INT for any interest earned on an escrow account (security deposit for your apartment) or interest earned on a savings account. Banks are only required to send this form to you when you earn more than $10 of interest.
• 1099-DIV for dividends or distributions on an investment account (e.g. IRA or 401k)
• 1099-G for income from the government (e.g. unemployment benefits, state tax refund). Note that you only need to include your state tax refund in income if you claimed a deduction for it in a prior tax year.
  
• 1099-R for any IRA or Roth IRA rollovers or withdrawals from retirement accounts.
• 1099-MISC for any self-employment income (e.g. freelance or contract work). You will receive a form from any client or customer that paid you more than $600 during the tax year.
• 1098-E if you paid interest on student loans
• 5498 if you made contributions to an IRA
• A nice big mug of tea or coffee. And a scone. 

*I could provide a rundown of the types of software out there, but this guy provides a fairly decent overview. I've stuck with TaxSlayer for the last two years, mostly because it was cheaper and my taxes have been pretty straightforward. I may poke around and check out TurboTax this year. I shall report back if I do.

Those of you who graduated this year (June 2013): check and see if you can file your taxes for free, since your income will be pretty low this year. Just to help you benchmark the costs, I think my family's accountant charged a few hundred dollars to file my 2010 tax return. With taxes as simple as ours, it's unlikely an accountant will uncover useful deductions that could recoup that cost, so I would recommend using tax prep software for now.

If I had a spread like this, I'm quite sure I could conquer anything the IRS threw my way.
Source: The Cherry Blossom Girl

Filing Your Taxes
Armed with your papers and refreshments, you should find the actual process of filing to be fairly straightforward. As you work your way through the tax software, I recommend making sure you fully understand each question they ask you. If you're not sure what a particular term means or if it applies to you, google it!

Make sure you file all of the following:

• Federal taxes
• State taxes for each state you have lived in this year
• City tax if applicable (e.g. New York City has it's own separate tax)
• Keep in mind that if you are earning income in a state other than the one in which you reside (e.g. you work in NYC but live in NJ or if you are a consultant), you will need to file a nonresident return. 

Don't forget to doublecheck all your work!!!

After You File
Sit back and relax. You did it! Go treat yourself to a nice stiff drink...errrr cup of hot cocoa.
You can expect to receive your return within 21 days of filing if you e-filed. Check up on the status of your return at:
Where's My Refund?
You'll need your SSN, filing status, and exact return amount. I'd recommend jotting down the return amount you expect to receive on a sticky note and leaving it somewhere you can access easily.

I leave you with a quote:
     The difference between death and taxes is death doesn't get worse every time Congress meets.
           - Will Rogers

Happy taxes! And if you get really frustrated and decide not to pay your taxes, you can always throw some loose leaf tea into your nearest local harbor. I hear that solution worked pretty well back in the day.

mmm, tasty.
Source: Trogolo Pundit

Note: I'm pretty sure I left off a lot of stuff. I apologize, I've been drinking and more than a few of my brain cells has decided to abandon ship. Please share any important things I forgot or helpful tips! :)