we <3 taxes!

make sure you pay your taxes, unless you want the IRS to hunt you down

What is the W2?

• If you have a job, you will receive a W2 document in your mailbox sometime in January from your employer. This document will display your total wages and taxes withheld from the past year. Keep this document safe, as you’ll have to report your wages on your tax return soon.
  • What do the boxes mean?
    • Box 1: Total $$ you earned this past year: cha-ching!
    • Box 2: Total $$ withheld due to federal income tax :'(
    • FYI, there’s more boxes, but these are the main ones to look at.
  • When you get the form, check that your name and social security number are correct and that boxes 1 and 2 seem reasonable. If not, contact your employer to correct any mistakes.

What is the 1098-T or 1099?

• These forms will come in handy while filing taxes. It details how much money you paid to your university.

Can I get tax deductions for donating to charity?

• Yes! But you’re broke and minimum wage isn’t treating you so well.
• Still want a tax deduction? Make sure that the charity is a qualified tax-exempt organization and save all of your receipts to serve as confirmation. Feel good about donating, AND get that tax deduction!

Do I need to file taxes?

• If you make less than $12,000 a year, you’re not required to file taxes.
• But, if you had money withheld from your paycheck (Box 2 on your W2, remember?), you may be eligible for a refund.
• HOWEVER, first check with mom and dad. If they claim you as a dependent on their tax forms, you will not be eligible for a tax return, but your parents will get a $4,050 tax exemption. Maybe ask them for a few dollars?

How do I file taxes?

• Here’s when the 1040 comes in. There are multiple variations of the form: 1040EZ (easy), 1040A (abridged), and 1040 (the long version).
• You probably don’t much money as a college student, so fill out either the 1040EZ or 1040A. Get your W2 and 1098-T/1099 forms ready, and follow the instructions on the page. Go get that tax return!

money, money, money

you need money? just borrow

How does a loan work?

• You might be taking out a loan to pay for college currently. Basically, you are borrowing money from a bank or organization with the promise that you will return the amount, plus interest, in a designated amount of time.
• If it’s a federal loan, the interest rate will not increase, but not necessarily for a private loan. Depending on the payment plan, you may have to start paying monthly installments on the student loan as soon as you graduate college.

I hear the word mortgage all the time but what exactly is it?

• A mortgage is basically a very large and long-term loan to help you buy a house.
• There are certain down payments to be paid upon the agreement of a mortgage, plus monthly payments to pay off the house. Depending on the contract, the interest rate might increase over time, so it may benefit you to pay off the house sooner than later.
• Should one default on payments, lenders are allowed to take back the house in a process called foreclosure.

I like my debit card. Why bother getting a credit card?

• Maybe you’re comfortable using a debit card because you know you can’t overdraw from your bank account. However, it’s a good idea to start building up a good credit score early.
• Think of your credit score as an indicator of your trustworthiness in paying back money. Your ability to take out loans in the future will rely heavily on your credit. Even renting an apartment might be difficult if the landowner is uncertain if you will pay on time.
• If you do choose to switch to credit card, try to set up an automatic monthly payment so you’ll never forget to pay. It’s an easy way to start out with a good credit score.

What is the difference between a checking and a savings account?

• If you have a credit or debit card, you probably already have a checking account without realizing it!
• A checking account is for daily use: depositing and withdrawing money for everyday purchases. There are few restrictions as to how often you can access your money.
• On the other hand, a savings account will restrict the number of times you can withdraw money each month, but gives a higher interest rate than a checking account.

what's that? you have more questions?

fine. if you insist

What is the difference between regressive, proportional and progressive tax?

• An example of regressive tax is sales tax. Say a new laptop costs $1000 with an additional 10% sales tax. No matter how much money someone makes, they must still pay that $100 in sales tax to buy the laptop. Now consider a lower income individual that makes $50,000 a year versus a higher income individual that makes $100,000 a year. The lower income individual pays a higher chunk of his income in sales tax while the higher income individual pays a smaller chunk of his income in sales tax (half as much, in this case).
• Proportional tax attempts to create greater equality in terms of income and taxes paid. If the fixed tax rate is 10%, everyone pays 10% of their income regardless of total wealth. This system is not as common.
• An example of progressive tax is the US federal income tax. The tax rate increases as income increases. This is closely associated with the term tax brackets. Depending on where you fall in the tax brackets, you pay a designated % tax. The more you make, the more you pay out of your income.

What is a 529 plan?

• Your parents may have started a 529 plan for you before you were even born to help you pay for college. Seriously, ask them. Depending on the plan, they likely set aside an amount of money each month.
• This money can be withdrawn by your parents for any reason, so don’t forget to thank your parents!