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Here's What Every Twentysomething Needs To Know About Taxes

Make it easy on yourself and get the money you deserve.

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1. If basically all your income is from a regular job that provides a W-2 form, you don't need to go to a tax preparer.

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I know — taxes can get scary, and some people address that fear by hiring a tax preparer every year to do their worrying for them. Thing is, if your income is from a regular job that takes taxes out of your paycheck and your employer gives you a W-2 form, you'll be fine doing your own taxes with the help of a computer program or online service.

If you have many sources of income, multiple investments, or do freelance work that requires to you to make payments every quarter, then you should consider a tax preparer. But if you just work a normal job, you'll be totally fine doing it on your own.

2. You can file your taxes easily with programs like TurboTax and TaxACT.

TurboTax / Via YouTube

These days, programs like TurboTax and TaxACT make it super-easy to file your taxes electronically. They remove all of the complicated directions and calculations on tax forms in favor of asking you questions about your job and life to get you your maximum refund. And you can easily use either one online.

3. And these programs are (sometimes) free to use.

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It's worth mentioning how the top two tax programs (TurboTax and TaxACT) break down before you decide to spend your money on them:

TurboTax has four editions to choose from. In all versions, filing federal taxes is free, while filing state taxes is about $20. If you're filing more than a simple W-2 form, you may need to pay for an upgrade to a more complex version, but the program will ask you questions to help to determine that, so don't worry if you're not sure which one you need.

TaxACT has three editions to choose from, and all versions can file federal taxes for free. With the Deluxe and Ultimate editions, state tax filing is included, and is $14.99 in the Free version. TaxACT doesn't have as many features as TurboTax, but it is significantly cheaper.

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4. Still want someone to help with your taxes? See if there's a Volunteer Income Tax Assistance (VITA) site in your area.

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If you're still a bit worried about doing your own taxes (who could blame you?) and make $53,000 or less, the IRS has a program called Volunteer Income Tax Assistance (VITA), which has sites in every state staffed with volunteers to help you. You can find a VITA site in your area by going to this website, and all you'll need is your tax forms, your ID, and your Social Security number to get the help you need.

5. If you're under 24, ask your parents if they're claiming you as a dependent.

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Before you start work on your taxes, call your parents and ask if they're claiming you as a dependent. In most cases, a parent will claim you as a dependent to reduce their taxable income by about $4,000, which could get them a bigger return. Unfortunately, there's a downside: Your parents claiming you as a dependent will disqualify you from some deductions, and maybe a bigger refund for yourself.

In order for your parents to claim you as a dependent, you have to be under 24 and their financial support has to count as at least 50% of your income. The full list of requirements can be found here, and it's very much worth going through with your parents to see if your situation qualifies.

6. If you're still in college, take advantage of opportunity credits that can give you a bigger return.

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Through our twenties, we realize one universal truth: College isn't cheap. If you're in an undergrad program or even deep into your graduate program, there are two tax credits you can take advantage of that may save you quite a bit of money.

American Opportunity Credit (undergrad students): This tax credit can cover up to $2,500 of undergraduate costs, and covers things like tuition, enrollment fees, books, and course materials. Parents can also claim this for dependent children who are students, and the student has to be taking classes at least half-time working toward a bachelor's or associate's degree.

Lifetime Learning Credit (undergrad students carrying limited course loads, graduate students): This tax credit can cover up to $2,000 of undergraduate and graduate school costs, and covers tuition, enrollment fees, and books you purchase from the school. It can also be used for courses taken to improve job skills.

You cannot claim both of these credits at once, although both are a great way to ease school costs. Both credits can be claimed while using most tax filing programs.

7. Even if you only made a small amount of money last year, it's worth filing your taxes.

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If you made less than $10,150 in the past year, you are not required to file a federal tax return. But even if you don't have to, you probably should still file for a few reasons. For one, working any typical job during the year means you likely signed a W-2, which means that taxes were taken out of your paycheck, and that means you are still eligible for a refund. There are also credits like the Earned Income Tax Credit or the Additional Child Tax Credit which can give you more money back if you qualify.

Even your return is not a million dollars, it might be a hundred or two, and that's still money to go toward the car or TV you've been wanting.

8. Know the differences between a standard default deduction and itemized deductions.

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This year, the U.S. government will offer you a standard deduction of $6,200, which means that amount is automatically subtracted from what you owe. If that subtracted amount is greater than the amount you owe, that's when you start getting money back through a tax refund. In most cases, taking this standard deduction and adding some other info should get you a pretty good return.

But if you've spent a lot this year for school or work, then you may want to think about filing itemized deductions, which allows you to subtract the cost of what you bought from what you owe. By doing this, you are giving up the standard deduction of $6,200, but this allows you to subtract things like medical expenses, the value of stolen items, large charitable donations, and more.

In most circumstances, the standard deduction for a twentysomething will get you more money (and take less work) than trying to do an itemize deduction with everything you bought. In the end, you should choose the one that gets you more money back.

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9. If you do want to itemize deductions, have your receipts ready.

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Of course, you want the biggest tax refund possible, and that's going to come down to you having proof that you bought things that helped you in school or for your job. Having your receipts ready when you do your taxes will not only make entering data easier, but will act as proof should the IRS have any questions about the expenses listed on your tax return. If you buy a lot of things online, you should also try going through your email history and putting digital records of your orders in a program like Quicken or Evernote for easy access.

10. You can get a bigger refund if you've been paying down a student loan.

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For many of us, paying off a student loan is one of the biggest financial burdens in our twenties. The good news is that if you're paying off loans, you can qualify for a student loan interest deduction of up to $2,500 on your return, even if your parent claims you as a dependent. You can check all of the requirements here, but if you made less than $80,000, were enrolled at least half-time, and were still paying the loan, you're more than likely to see money back.

11. Having or not having health insurance can impact your return because of Obamacare.

There are 20,000 pages to the Affordable Care Act (better known as Obamacare), and trying to dig through them to figure out how having or not having health insurance affects your taxes would be ridiculous. Here's what you need to know:

1. If you could have gotten health insurance and didn't last year, you may have to pay a penalty of up to $95 for yourself or $285 or your family.

2. But, if you were uninsured for less than three consecutive months, you won't have to pay a penalty.

3. A tax penalty would be directly deducted from your refund or added to your tax bill.

4. If you don't have health insurance and need help paying for it, you can qualify for a premium tax credit and get a reduced bill for health insurance or cash back on your return.

Keep in mind, if you're under 26 years old and your parents have health insurance, you can still be covered by their policy. And you don't have to worry too much about knowing the details of the law, since programs like H&R Block and TurboTax include all of the changes and will calculate your taxes accordingly.

12. If you paid money to move for a job in the past year, you can deduct that from your taxes.

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Let's say you finished college, went home for a bit, and now you're finally moving somewhere to start your dream job. The silver lining of all the schlepping is that if you had to do it for work, you can deduct relocation expenses like flights, U-Haul trucks, gas for driving, storage units, and more. Of course, your new workplace has to be at least 50 miles from home and you had to have worked at least 39 weeks in the past year, but you can take pride in knowing that the move was worth it.

13. You can get your tax return faster with a direct deposit, or use some of it for savings bonds.

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It's always nice to see that big check when it comes time to receive your tax refund, but there are a number of ways to get your cash faster or more efficiently. You can have your tax return directly deposited into your bank account faster, or even purchase a United States Savings Bonds which gain interest, never lose their value, and are free from state, local, and some federal taxes.

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14. You can also choose to receive some of your return as gift cards with bonuses, but it might not be the best idea.

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Services like H&R Block and TurboTax offer an extra 5% to 10% on gift cards to places like Amazon or Starbucks if you put some of your return toward them.

But think about it: This is your tax return, and maybe even the biggest amount of money you'll see in one check all year. I know getting free iced white chocolate mochas for the next year seems tempting, but you'll be better off in the long run putting that money toward something that matters, like a car or retirement.

15. Anxious to see your refund? Check its status online or with the IRS2Go App.

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When you're an adult, waiting for a big tax refund might as well be like waiting for Christmas morning. if you're getting anxious, you can check the status of your federal refund by going on the IRS's "Where's My Refund" service online, or downloading the the IRS2Go mobile app for iPhone or Android. A lot of states also offer the ability to track a state refund online, as you can check the rules for your own state by following the links here.

16. Beware of scammers claiming they're the IRS and requesting your tax information.

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Unfortunately, there are sad souls out there who will try and take advantage of the hectic tax season by scamming people. The IRS has posted a list of these scams on its website, with the most common ones being sketchy emails asking for your username and password or a phone call from a phony IRS agent who asks for immediate payments. Remember that the IRS will never call you about a bill or email you asking for a password, and you will be totally fine.

17. Rushing to do your taxes and need more time? You can ask for a free time extension.

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For some reason, our biggest responsibilities are the ones that tend to make us procrastinate the most. By all means, you should not procrastinate on your taxes, but if you run out of time for any reason, you can file for an federal tax extension by April 15 to make your new federal tax due date October 15. You can also file for a state tax extension, although each state has different rules for how to get more time. You can extend the time for your federal return by filling out a form from the IRS, or doing it through TurboTax.

18. Most of all: Be honest on your taxes and you'll be just fine.

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The worst thing that can happen when it comes to your taxes is if the IRS triggers an audit, which allows them to ask you questions about your expenses and potentially take away from a bigger return. The chances of this happening to you however are very, very slim, as the IRS only audited less than 1% of all tax returns last year.

Most of those audited are people making over $1,000,000 or those who greatly lie about their expenses, so if you're working a job or going to school as a twentysomething, you'll be fine. Keep your receipts close, be realistic when entering your expenses, and you'll more than likely to get a good amount of money back.

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