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With Tax Day (April 15th) approaching, here is your (mostly) complete guide to federal income taxes, state income taxes, tax returns, IRS forms, IRS refunds, 1040EZs, 1099s, and other things you need to know in order to file your tax return. (TL;DR: don't worry, you got this.)
Support How to Adult on Patreon at http://www.patreon.com/howtoadult
Our other tax video, How to Do Self-Employment Taxes: https://www.youtube.com/watch?v=bGyEF5zTxJY
"How to Adult" is a "life skills" edutainment channel executive produced by Hank Green and John Green. Subscribe for new videos every week!
Tumblr: http://learnhowtoadult.tumblr.com
Twitter: http://www.twitter.com/learnhowtoadult
Facebook: http://www.facebook.com/learnhowtoadult
VIDEO LINKS:
IRS Free File: http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free
TurboTax: http://www.amazon.com/gp/product/B00FFIMBOA/ref=as_li_ss_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=B00FFIMBOA&linkCode=as2&tag=tmicmar-20
IRS W-4 Info: http://www.irs.gov/Individuals/International-Taxpayers/Withholding-Exemptions---Personal-Exemptions---Form-W-4
1040 Form(s): http://www.irs.gov/taxtopics/tc352.html
Form 4868: http://www.irs.gov/uac/Form-4868,-Application-for-Automatic-Extension-of-Time-To-File-U.S.-Individual-Income-Tax-Return
Schedule A: http://www.irs.gov/uac/Schedule-A-(Form-1040),-Itemized-Deductions
1099 Form(s): http://search.irs.gov/search?as_sitesearch=www.irs.gov/Help-%26-Resources/Tools-%26-FAQs/FAQs-for-Individuals&q=1099&output=xml_no_dtd&proxystylesheet=irs_portals_frontend&client=irs_portals_frontend&oe=UTF-8&ie=UTF-8&num=10&ud=1&exclude_apps=1&site=default_collection&numgm=5&requiredfields=-archive:1&&access=p&sort=date:D:L:d1&entqr=3&entqrm=3
National Association of Enrolled Agents: http://www.naea.org/
Co-created by:
Emma Mills
http://www.youtube.com/elmify
Directed, Edited, Hosted and Co-written by:
T. Michael (Mike) Martin
http://www.youtube.com/tmikemartin
(Mike is also a Young Adult novelist. His book, THE END GAMES, is available at all online booksellers, including Amazon: http://www.amazon.com/gp/product/0062201816/ref=as_li_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=0062201816&linkCode=as2&tag=tmicmar-20&linkId=CF4ULRBEW6LATV3C)
Executive Produced by:
Hank and John Green
http://www.youtube.com/vlogbrothers
Co-writer and Tax Adviser:
Gary A. Hensley, MBA, EA (You can check out Gary's blog at http://taxsolutionsforwriters.com/)
Notes on the W-4:
Two general examples about "tweaking the W-4" are important enough to review here:
(1) You may be single and claim 1 exemption but you have other significant investment income (such as dividends, interest, or capital gains) on which no federal income tax is withheld that will be added into your tax return at the end of the year. While 1 exemption might cover the tax due on your wages, it is doubtful it will cover your investment income, so folks in this position, will usually claim zero exemptions to have more income tax taken out to also help cover the investment income.
(2) You are newly married, and you and your spouse update your W-4 to claim "married" with 1 exemption. This 1 exemption could be sufficient to cover each spouse's income but when the two incomes are combined on their joint tax return, it will "push" a portion of their income into a higher tax bracket (called the "marginal tax bracket") that the withholding tables do not factor in. Thus, the newly married couple could owe a significant income tax balance at the end of the year. This married couple should consider claiming zero exemptions on their W-4's and also the option to voluntarily "add" a fixed dollar amount to their federal withholding such as $25 per paycheck. They also have the option of checking the W-4 box that says, essentially, "I am married but want my withholding deducted as if I were single." The single withholding tax table takes a larger amount of income tax at every level of income earned.
INFO ABOUT THE SCHEDULE A:
If you itemize deductions such as mortgage interest, property taxes, contributions, union dues, and medical expenses, those items will be included on Schedule A. Itemized deductions will ONLY be used if that total exceeds the amount of your standard deduction for your filing status. The 2013 standard deduction for a single filer is $6,100 and for married, filing jointly it is $12,200. These amounts will go up slightly for 2014 returns. Each exemption (personal and dependent) is worth $3,900 in 2013. In short, this means that a single filer, in 2013, could have income up to $10,000 ($6,100 + $3,900) and owe no income tax (thus getting a full refund of federal income taxes withheld). To get the $3,900, the single filer must not be claimed as a dependent on someone else's return.
INFO ON TAX EXTENSIONS (FORM 4868):
http://www.irs.gov/uac/Newsroom/Can't-File-By-April-15,-Use-Free-File-to-Get-a-Six-Month-Extension-2013
Support How to Adult on Patreon at http://www.patreon.com/howtoadult
Our other tax video, How to Do Self-Employment Taxes: https://www.youtube.com/watch?v=bGyEF5zTxJY
"How to Adult" is a "life skills" edutainment channel executive produced by Hank Green and John Green. Subscribe for new videos every week!
Tumblr: http://learnhowtoadult.tumblr.com
Twitter: http://www.twitter.com/learnhowtoadult
Facebook: http://www.facebook.com/learnhowtoadult
VIDEO LINKS:
IRS Free File: http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free
TurboTax: http://www.amazon.com/gp/product/B00FFIMBOA/ref=as_li_ss_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=B00FFIMBOA&linkCode=as2&tag=tmicmar-20
IRS W-4 Info: http://www.irs.gov/Individuals/International-Taxpayers/Withholding-Exemptions---Personal-Exemptions---Form-W-4
1040 Form(s): http://www.irs.gov/taxtopics/tc352.html
Form 4868: http://www.irs.gov/uac/Form-4868,-Application-for-Automatic-Extension-of-Time-To-File-U.S.-Individual-Income-Tax-Return
Schedule A: http://www.irs.gov/uac/Schedule-A-(Form-1040),-Itemized-Deductions
1099 Form(s): http://search.irs.gov/search?as_sitesearch=www.irs.gov/Help-%26-Resources/Tools-%26-FAQs/FAQs-for-Individuals&q=1099&output=xml_no_dtd&proxystylesheet=irs_portals_frontend&client=irs_portals_frontend&oe=UTF-8&ie=UTF-8&num=10&ud=1&exclude_apps=1&site=default_collection&numgm=5&requiredfields=-archive:1&&access=p&sort=date:D:L:d1&entqr=3&entqrm=3
National Association of Enrolled Agents: http://www.naea.org/
Co-created by:
Emma Mills
http://www.youtube.com/elmify
Directed, Edited, Hosted and Co-written by:
T. Michael (Mike) Martin
http://www.youtube.com/tmikemartin
(Mike is also a Young Adult novelist. His book, THE END GAMES, is available at all online booksellers, including Amazon: http://www.amazon.com/gp/product/0062201816/ref=as_li_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=0062201816&linkCode=as2&tag=tmicmar-20&linkId=CF4ULRBEW6LATV3C)
Executive Produced by:
Hank and John Green
http://www.youtube.com/vlogbrothers
Co-writer and Tax Adviser:
Gary A. Hensley, MBA, EA (You can check out Gary's blog at http://taxsolutionsforwriters.com/)
Notes on the W-4:
Two general examples about "tweaking the W-4" are important enough to review here:
(1) You may be single and claim 1 exemption but you have other significant investment income (such as dividends, interest, or capital gains) on which no federal income tax is withheld that will be added into your tax return at the end of the year. While 1 exemption might cover the tax due on your wages, it is doubtful it will cover your investment income, so folks in this position, will usually claim zero exemptions to have more income tax taken out to also help cover the investment income.
(2) You are newly married, and you and your spouse update your W-4 to claim "married" with 1 exemption. This 1 exemption could be sufficient to cover each spouse's income but when the two incomes are combined on their joint tax return, it will "push" a portion of their income into a higher tax bracket (called the "marginal tax bracket") that the withholding tables do not factor in. Thus, the newly married couple could owe a significant income tax balance at the end of the year. This married couple should consider claiming zero exemptions on their W-4's and also the option to voluntarily "add" a fixed dollar amount to their federal withholding such as $25 per paycheck. They also have the option of checking the W-4 box that says, essentially, "I am married but want my withholding deducted as if I were single." The single withholding tax table takes a larger amount of income tax at every level of income earned.
INFO ABOUT THE SCHEDULE A:
If you itemize deductions such as mortgage interest, property taxes, contributions, union dues, and medical expenses, those items will be included on Schedule A. Itemized deductions will ONLY be used if that total exceeds the amount of your standard deduction for your filing status. The 2013 standard deduction for a single filer is $6,100 and for married, filing jointly it is $12,200. These amounts will go up slightly for 2014 returns. Each exemption (personal and dependent) is worth $3,900 in 2013. In short, this means that a single filer, in 2013, could have income up to $10,000 ($6,100 + $3,900) and owe no income tax (thus getting a full refund of federal income taxes withheld). To get the $3,900, the single filer must not be claimed as a dependent on someone else's return.
INFO ON TAX EXTENSIONS (FORM 4868):
http://www.irs.gov/uac/Newsroom/Can't-File-By-April-15,-Use-Free-File-to-Get-a-Six-Month-Extension-2013
(on-screen text: Hi! We know this video may not apply to our amazing international viewers. Sorry! We <3 you! We'll return All The (Global) Things ASAP, we promise. Until then, thanks for watching, and keep remembering to be awesome. Sincerely, the HOW TO ADULT Crew)
Introduction (00:27)
Mike: The process of filing your taxes is a bizarre wonderland, where nothing seems to quite make sense. And even though you came into the process full-sized, soon you start feeling smaller and smaller and.. smaller. This video will not attempt to cover every type of tax form. That would be, to use a technical governmental term, bananas. But rather, the ones that most people will use.
Tax file requirements are different when you are employed by a company as an employee than they are when you are employed by your own business (which is also known as being a freelancer or a sole proprietor) In this video, we will focus on the filing requirements as an employee, in next weeks video we will give you the key information on being self-employed.
This video will be divided into four parts. 1. How to prepare to prepare to prepare your tax return 2. How to prepare to prepare your tax return 3. How to prepare your tax return, and 4. In summation.
So to fully explain how employees pay taxes, lets do as Wonderlanders do: and begin at the beginning.
Part One: How to prepare to prepare to prepare your tax return (01:29)
Now to really understand how employee taxes work, we have to jump in the TARDIS and go back in time, because you may not realize, you've been paying taxes all year long. Before you start employment, your employer will require you to fill out a Federal and State W-4. The W-4 will ask you things like your marital status, and how many exemptions you would like to claim.
What's an exemption? Definition time! Exemptions are things that lessen your tax burden, and pertain primarily to personal independency status'. The IRS has a great W-4 worksheet on their website, but for our purposes, I can safely tell you that the fewer exemptions you claim, the more money will be taken out of your paycheck.
(On-screen text: NOTE: 7 states have no income tax and 2 others only tax dividends and interest. Also, although your employer will also withhold and match amounts for Social Security and Medicare taxes, these withholdings are based on a fixed percentage of your wages and the W-4 has no effect on them. tl;dr: don't worry.)
So anyway, the W-4 will be used by your employer to determine how much state and federal income tax to withhold from your paycheck throughout the year. Basically, they're trying to predict how much you owe, and have you pay it throughout the year, rather than at one time. Now you may find out eventually that you have paid too much throughout the year, in which case you will achieve a tax refund.
And definition time! A tax refund is a reimbursement on taxes when the tax burden (*liability) is actually less than the taxes paid. In other words: "Dude, you gave me too much, here it is. Save it." What I'm trying to say is that the W-4 is a superdupes important form, and it can prevent, if properly completed, a very nasty surprise at the end of the year.
Okay, a couple quick notes before we move on. 1. Your life circumstances may change year-to-year, so you should definitely at least review your W-4 at the beginning of every year, and 2. Although there are circumstances when it's actually kind of a smart thing to tweak your W-4 so that they actually take more than you would technically owe on your income throughout the year (Some people have the government take out more than they're actually owed, simply because they want to treat their refund as a kind of savings account) we have thoughts on this though, because there are actually a lot more effective ways to have your money work for you, than to give the government an interest free loan throughout the year. But, anyway.
Part Two: How to prepare to prepare your taxes (03:28)
'K, so a year has ended, you can see April 15th approaching with your prophecy powers, Professor Trelawney, mm? So to prepare to prepare your tax return, you're gonna need a few things: 1. Your W-2.
Your employer is required by law to send you what is called a W-2 postmarked by January 31st. The W-2 is sent to you and also to the IRS, and it gives you all the important information to complete your tax return.
Definition time! A tax return is a form on which a tax payer makes a statement annually on personal circumstances and income, and it is used by tax authorities to assess the tax liability of said tax-payer. Basically, you owe us this much money.
Possibly required equipment number 2: Other information forms. In addition to your W-2 you may have other income information forms. These may include a 1099 INT which is for interest income, a form 1099 DIV which is for stock dividends, 1099 G which is for state income tax returns (*refunds) and also for unemployment benefits and perhaps a 1098 T, if you have any education expenses. Don't get freaked out by all the numbers and the letters, it will be okay, I promise. We'll get to that in just a second.
Possibly required equipment number 3: A "schedule A". If you itemize your deductions you should prepare this information on what is called a "Schedule A".
And now, at long last, we are on part three of this video: How to prepare your tax return.
Part Three: How to prepare your tax return (04:50)
With e-filing as the predominant form of filing you will most likely use some kind of online avenue or downloaded software to prepare and pay your taxes. TurboTax is the most popular, and irs.gov supplies free software for anyone with income up to $58,000 a year. Whether you prepare your return manually or with software, irs.gov is actually a really wonderful resource.
One of the great things about using software is that it will prepare your state and federal taxes at the same time, which saves a lot of light work let me tell ya.
(footage from old Vlogbrothers video)
John: Hoooowww, boy!
(on-screen text: someone doing federal and state income taxes separately)
Mike: Okay, so finally, this is what you've been waiting for, here is how to prepare your tax return.
Step One: Choose the correct form. All the available forms will be 1040s of some kind. The 1040 EZ (pronounced "easy"), which is pretty much what you think it is, the 1040 A, which is also known as the short form, and the regular 1040 which is also known as the long form. When you input your personal information, W-2 information and any other return information you might have, the tax software will tell you exactly what form is appropriate for you.
Step Two: If appropriate, put in the information for a "Schedule A".
Step Three: Pay those taxes! By April 15th! You will either be given the amount by your preparer or by your tax software. If you can't possibly file by April 15th, you should fill out a form 4868 and get an automatic six-month extension. Please note though that this is only an extension to file your return, not to pay your taxes. (On-screen text: "NOTE: This is kinda counterintuitive and confusing. Link to fully explain it below") So, if you think that you owe something, then you have to include that with the extension.
Most tax software for most people is going to be sufficient, it's gonna help you go through every step in a pretty self-explanatory way. But, if you would rather not prepare your own return, you would be best served to use a licensed professional. These people may be Certified Public Accountants, also known as CPAs, or they might be Enrolled Agents, who are people who are licensed to practice by the IRS.
If you go to the website for the National Association of Enrolled Agents, you'll be able to find the contact information for any Enrolled Agents who might be in your area. Both of these kinds of professionals can represent you in front of the IRS or in front of State Income Tax departments if your return is selected for a review, or an audit.
Definition time! An audit is... "oh no!" Although we don't endorse any specific business, you may also choose a preparer from one of the national chains. These include places like H and R Block or the one where the Statue of Liberty dances in front of Arby's. Now you may be in a situation where your great-uncle BoBo offers to do your taxes for you, but I would give that second thoughts. And third thoughts.
Part Four: In conclusion and review (07:44)
Here, in the most rudimentary sense, is what you should do.
- Fill out your W-4 correctly, being sure to update it every year.
- Gather all income information forms, including your W-2, and any kinds of 1099s that might also apply to you.
- Collect information on your expenses. Ideally, you should do this throughout the year in a software such as quicken, but if you can't, you should get all the documentation that you can such as bank account statements, screen-shots etc.
- File your return, either by using a pencil and paper, which I think they still make, software or a tax preparer, and send in your payment by April 15th.