When it comes to taxes, it often seems that paying through the nose is a necessary evil and customary right of passage for adulthood. However, there are some clever tricks of the trade to help you avoid getting punked by The Man. Here are a few tips to help you understand the ABCs of taxes, and perhaps help you hang on to more of your cash.

Time to Pay Up

The last day to file your taxes is just around the corner on Tuesday, April 18th. If you work, it’s time to start filing taxes with the federal government and the state in which you reside. There are a few ifs, ands and buts regarding your status, so you need to know your options.

In general, once you have the following gross income, the law requires you to file a federal tax return with the IRS:

  • Single: $10,300
  • Head of Household: $13,250
  • Married Filing Jointly: $20,600
  • Married Filing Separately: $4,000

So Many Forms, So Little Time

If Mom and Dad or another legal guardian still pays more than fifty percent of your living expenses, then they can claim you as a dependent on their taxes. This lack of legitimate lodging isn’t all bad. Based on annual income, a young person can either claim exempt or zero withholdings on their W-4. This means one of two things: taxes won’t be owed at all or they will be fully refunded. Try filing this way for as long as possible because the real world can make a person real poor, real fast. Get creative: If you let your parents claim you as a dependent, have them pay you the amount you’d have received if you’d filed independently. Chances are, they’ll save more by claiming you as a dependent than you would get as an independent, and everyone wins.

Don’t Be Late  

If you don’t file your taxes, the government will find you, and the repercussions are not great. After a series of letters, the IRS will approximate the amount due based on your last return and will set a time period to come clean and cough up the dough. Finally, they will garnish your wages, which is a fancy term meaning they are taking what you owe them in installments from your regular paycheck with penalties and fees factored into the mix. As you can imagine, this is an enormous inconvenience. They will usually agree on a payment plan if you make a voluntary effort to rectify the debt. Avoiding this situation can save your checkbook, your ego and your reputation.

Be Honest

Always take the high road. You can’t hide money and come out ahead. A few extra bucks in your pocket today will not offset the headache that a federal audit will cause in the future. Report as accurately as possible.

Cover Your Assets

Keep records and receipts of all financial transactions in one box or file folder. If a federal bean counter questions your return, you have proof explaining why the trip to Tahoe or lunch at Luigi’s are business expenses.

Paying taxes is a necessary evil, like taking out the trash. It avoids living in a pile of trouble and keeps your governmental relations smelling sweet. Hopefully these tax tips can shed light on the path of integrity. You will be fortunate to never find yourself face to face with the grim reaper of the government, the federal accountant. Also, don’t forget that ELGA has teamed up with TurboTax to save you up to $15 on TurboTax Federal products to make it easy and help get you the best refund. Good luck and happy filing!

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