The New Grad's Guide to Personal Finance

Taxes: the misunderstood beast

Filing taxes seems to be an activity that causes everyone much panic and stress. However, it can actually be straightforward if you grasp a basic understanding of how the filing process works and if you use a software tool to file electronically.

Tax returns and filing

Every year, you must file a tax return to the government indicating your income and assets as well as tax that you have paid already. The Internal Revenue Service then reviews the return and either collects money from you for the difference you owe or sends a refund check for the amount you overpaid.

The deadline to submit your tax return is always April 15. Your tax return details income, assets, and tax paid from the previous year. So, for example, a tax return that you filed on/before April 15, 2010 was for your finances for the year of 2009.

There are two types of tax returns that almost everyone must file:

A note about required forms

As everyone’s financial situation differs, some people may require many different forms to complete their tax forms. However, there are just a handful of essential forms that everyone should be familiar with:

Completed before filing

Used while filing

TaxACT: a straightforward software solution

Even with just the forms mentioned above, you might start to be a bit confused about which form is used for what purpose. Now if you think of all of the forms that could apply, it’s easy to lose track of everything. Luckily, filing taxes has become significantly easier with the advent of software solutions that allow you to file electronically.

I personally recommend TaxACT because:

Filing your federal tax return with TaxACT is free, and state tax returns cost $14.95 each.