Taxes 101 (Tax Basics 1/3)

  • Who Needs to do Taxes?

If you have a job, you most likely need to do federal and state taxes. If you earned over $12,200 in 2019, you need to file federal taxes. If you need to file federal taxes, you most likely will have to file state taxes as well. Some states do not have an income tax, but that is not the norm, and California is not one of those states. 

However, even if you don’t have to file taxes, you may want to. The chances are good that if you worked but did not meet the $12,200 income threshold, you will get a refund on the income taxes that came out of your paychecks.

  • How Do Taxes Work? 

The USA has a “pay-as-you-go” system, which means that every person that has earned income pays taxes on an estimated basis throughout the year. These taxes are used to fund government programs and services. 

If you are an employee somewhere, those taxes will be estimated and taken out of your paycheck without you having to worry about them. You will fill out a W4 form when you first start a job. Your employer uses this form to estimate the taxes you’ll owe during the year so they can deduct them from your paycheck and send them straight to the government. 

If you are an independent contractor or business owner, if you sell handmade goods on Instagram for example, you estimate your tax owed to the government and make quarterly payments to the IRS. 

Once a year, on April 15, people who have earned income file their taxes from the previous year. This means each person fills out a worksheet stating how much money they made, how much in taxes they paid, and other information. The government uses this information to determine how much that person owes in income taxes. If you paid more than the government determines you owe then you receive a refund. If you paid less than you should have you will owe the government money. 

If you are an employee, you may notice multiple tax deductions from your paycheck. The different deductions you see are for federal income taxes, state income taxes, possibly county taxes, medicare, and social security taxes. 

  • When Should I Do My Taxes? 

Employers and companies who hired independent contractors must send out tax forms for the previous calendar year by January 31st at the latest. So, if you were an independent contractor and drove for Uber, Uber should send you a 1099 tax form by January 31st. If you were an employee, say you worked at Starbucks, they would send you a W2 tax form. Even if you no longer work for that company, they are obligated to send you your tax information. Some companies may mail these forms, but some may send them electronically. 

Once you have these forms from all of the places you worked the previous year, you can file your taxes. You must file your tax return by April 15th at the latest, but you can and should do it earlier. 


  • How Do I Do My Taxes?

There are multiple ways to file your federal and state tax returns. You can print out and mail in your return, you can use a tax preparation website like HR Block or FreeTaxUSA, or you can pay a tax preparer. 

Most students should be able to file both tax returns for free through a tax preparation website. A tax preparation website would also be the easiest way to file taxes for students; these sites have a lot of helpful tools and free chat agents to help if you have any questions. The IRS website has a full list of where taxes can be done for free if you make less than $65,000 a year. 

If you have a more complicated return, for example, if you own a house or have children, a tax preparer website may still be useful to you. However, an in-person tax preparer may be a similar cost-effective way to make sure your taxes are done correctly. Some companies charge between $40-100 to prepare tax returns, which may be cheaper than trying to figure it out yourself and not submitting a correct return.

You can always prepare your tax return for free using the government forms that are available on the IRS website, but the forms can be complicated, and you may miss out on tax credits (free money) that you qualify for. Also, if you submit a return that is not correct, whether intentional or on accident, you may end up owing money by the time the return is corrected due to late fees or other fees. This is another reason why it is better to file your return as soon as you are able, rather than waiting until April to submit your return. 


  • What if I am an international student? 

International students face specific rules regarding filing their taxes. All international students and scholars present in the U.S. must file an income tax form and Form 8843 each year, regardless of whether you were employed in the U.S. or not. If you worked or received a stipend, grant, or allowance in the UC you may also need to file a Form 1040NR. Glacier Tax Prep has partnered with UCSC to assist international students with filing their tax returns. 


  • What if I am a DACA recipient?

DACA recipients should not be afraid to file a tax return. There are protections in place to keep information sent to the IRS for tax purposes confidential. You must use your Social Security number to file taxes if you have one, even if you used an ITIN in the past.