This time of year taxes come to the forefront of many Americans minds. Paycheck after paycheck we’ve been shocked at the dollars that are withheld for both state and federal taxes. Medicare Tax? Social Security tax? Property taxes for both home and auto, as well as sales tax every time we purchase something; including on Amazon these days! For the past year we’ve been paying taxes and now is the time of reckoning, the time when we sit down with the federal and state government, and figure out what we owe vs what we’ve already paid. If you’re lucky, you’ll get a return, otherwise you’ll have to pay up!

The basic principle behind personal taxes here in the US is starting with a big number (gross income) and then adjusting it down. You’ll get deductions from your gross income which can come in many different flavors: charitable giving, student loan interest, mortgage interest or even losses on your investments. This number will work it’s way down to your AGI, or adjusted gross income. From this number, your taxes will be calculated based on your tax bracket. This number will be matched up against all the withholding you’ve had throughout the year (via your paycheck at work) and you’ll be refunded the surplus, or forced to pay the difference!

At the bottom, I’ve included links to other articles I’ve written that go into more detail on how taxes work and a good article where I answer some FAQs yopros have about taxes. Before we get to it, a couple of quick pointers to be thinking about while you do your taxes:

1. The deadline to file is April 15th, so get them in before this date, otherwise you’ll have to file for an extension.
2. Unless your finances are a little more complex (i.e. rental income, foreign income or complex investment gains/losses), you should have no problem doing your taxes yourself. Some people pay an accountant to do them for you (like $150 or so), but I think most of us should manage just fine without one.
3. TurboTax and H&R Block are both solid options. I think these are the more reputable ones out there (although TurboTax has a little scare recently with fraud) but honestly these or other online services out there are fine. You shouldn’t even have to go in person anywhere, and can do most of it online.
4. Keep those documents! I try to keep all my W2s and charitable contributions in one file folder, all together and easily accessible. I do this throughout the year, that way come tax time I’m ready to go! Even after you’ve filed, you should still keep this folder handy. Although a slim chance, the IRS could audit you and if so, you better hope your documents are in order!
5. There are definitely little ways to cheat here and there, but honestly I don’t think it’s worth it. The IRS does audit a select number of tax payers, and I’d hate to have them showing up at my door. Plus, remember that your employers are sending a copy of your W2 along to the federal government too, so it’s not like the government couldn’t put two and two together.
6. If your refund is HUGE, consider scaling back your withholding for next year. You basically just gave the government a free loan for an entire year, money that you could have been earning interest on!
7. Write down your AGI for the year. At least for my taxes, I’m always asked to put down last year’s AGI, almost like a PIN or password. Keep it handy!
8. Finally, please be careful with your taxes. We live in a world full of identity theft and scammers. Be smart with your filing and your documentation!

Best of luck filing your taxes this year, and my fingers are crossed for you to get a big refund!

Other good resources: How do taxes work and Taxes FAQ