By Maureen Sheeran
Alexa Gilomen, a senior at the University of Georgia said she doesn’t consider her taxes to be “a huge deal” now, but added, “I feel like in the future, it is going to be scary.”
Matt Goren, who teaches personal finance in UGA’s College of Family and Consumer Sciences, said students should overcome any fears about taxes by simply jumping in. “Give it a shot,” he said. “I think people think taxes are really confusing, and they’re really not that bad.”
Gilomen’s experience represents that of many college students. She works a part time job, has taxes withheld from each paycheck, and uses her family’s TurboTax subscription to file a return in April.
Most of the time, that’s as difficult as it gets. But what about the scenarios that arise for other students? Working multiple part time jobs, being employed as a contractor, or working an internship in another state can all complicate the process of filing for taxes.
Goren answered a few questions that helped to explain what young people need to know about taxes.
Q: What are the top two things you would tell a young person doing their taxes by themselves for the first time?
A: Try it, do it, don’t worry about it. Go to Volunteer Income Tax Assistance, (VITA) or if you’re feeling more confident, use TurboTax or TaxSlayer or something like that. Don’t do it on paper by yourself. TurboTax is free if you make less than [$31,000] a year. If you just have your part-time job, and you pay tuition, all the forms are just sent to you, then you just enter the numbers on the forms into the programs and click submit, and you’re done. 2. Don’t do things that are stupid financially in the big picture, to try to save money on taxes. For example, not reporting your restaurant money. Not claiming all this money, which can literally put you in prison, to save what? You’re in a low-income tax bracket, so your federal taxes are like, nothing. ‘I got one over on the government; I saved $50 this year!’ And now you might be going to prison for it. Are there good odds you’re going to go to prison over it? No. Really unlikely. But you could, and there’s no statute of limitations on tax fraud. It could come back to you when you’re 70 years old. In criminal court, you’re innocent until proven guilty. In tax court, it’s guilty until proven innocent. The IRS says, ‘we think you committed tax fraud,’ and you have to prove that you didn’t.
Q: What should young people know about tax services? You recommended TurboTax and Vita. Are there any that you would recommend against using?
A. Yes. Ones that cost you money. Most college students do not have complicated situations. But if you’ve got a small business, you’re paying business expenses, you are doing kind of crazy investment stuff– the more and more complicated your tax situation, the more it’s WORTH paying something to do it for you. But to just file your W-2 from your job, and maybe a 1099, like you have to do for an independent contractor, it’s so easy to do on your own. It’s so easy to go to VITA and say, “can you double check what I did.” For most people, it’s not worth paying any money.
Q: How do taxes for independent contractors work?
A: Most jobs, you earn the money, and then taxes are withheld on the way to your checking account, but that’s not the case with independent contractors. Independent contractors pay their income taxes at the end of the year.
Q: How does it work if you were employed as an independent contractor in another state?
A: You’re going to have to fill out a [home] state [tax return], and one for the other state where you earned the money.