Tax season basics, decoded

Guarantees in life are few. Tax season is a rare guarantee. Even if you don’t do your own taxes today, let’s get fluent on the essentials, to quash any feeling that it’s more complicated than you can handle.

Q: What’s the Tax 101?

👩 Who pays:
Anyone who makes income >$12,200 (in 2019) – that # can change from year to year. FYI: The meaning of income is broad: not just salary, includes investment income, property income, and other good stuff coming your way over the years.

🗓 When to pay:
Jan 31st — Your employer from the previous year (internship or full time) must send your tax docs (W-2s or 1099s) by Jan 31st each year, meaning that you should receive yours in the mail around the beginning of Feb.
April 15th — Creatively known as “Tax Day”! You have until April 15th to submit (“file”) your docs to the IRS.

Busting form-phobia...
W-2 forms go to employees who worked for one company at set hours 1099 forms go to contractors who worked for different companies on projects (aka freelancer).

Q: Who decides how much I owe?

Good news: not you! Your employer has deducted the necessary taxes out of your salary all year long. That’s why when you got your paycheck each month, the pay looked depressingly less than you expected. So you have to calculate nada!

Quick aside… So how did your employer decide on the deduction? Your W-4! That form you filled out Day 1 on the job where you checked off a list of “allowances” (reasons the government should let you to keep more money). The more allowances you check off (aka “claim”), the more of your paycheck you get to KEEP.

Some calculations from you ARE required though if you have income other than your salary (EX: from investments), but we get into this later on why & how!

Q: What taxes were deducted from my salary automatically?

The bad news? There’s a lot of information out there on taxes. The GOOD news? We are kicking off a mini-series in the next few Monday MoneyDrops on tax topics that matter so that when April 15th rolls around you’ll be popping bottles instead of popping pills.