FINANCIAL FRESHMAN #035
TL;DR → After you graduate, you will likely have to file your income taxes for the first time on your own. Tools like FreeTaxUSA can make the process simple without breaking the bank. Your W-4 will tell your employer how much to withhold from each one of your paychecks, and filing taxes is simply when you settle any discrepancy with the IRS. Everything has to be buttoned up by 4/15.
Tackling Your Taxes
Right now your mental bandwidth is mostly taken up by your schoolwork, and that is completely okay. My purpose with this blog is to equip college students to transition into financially independent college graduates—and that will require some knowledge on income taxes. If you can lend me a tiny bit of bandwidth now to talk about them, you’ll be thankful down the road.
When I first began my full time career, I (obviously) filed my income taxes. I had made income in the past from high school jobs, but starting my career marked the first time that no one else could claim me as a dependent. The process didn’t make a ton of sense, and I remember panic-Googling a number of things along the way to make sure I didn’t mess anything up. Add “filing your tax return” to the ever-growing list of things that our high schools (and colleges) didn’t prepare us for.
Enter this series: Tackling Taxes. Over the next several weeks, we’ll spend our time on Financial Freshman solely talking about income taxes. We may tell you some things you already know along the way, but the lone goal is making this process make sense to you. Challenge accepted.
Tax Day
“Tax Day” in the United States is April 15th of every year (unless that falls on a weekend, then it’s the following Monday). This is your deadline to accomplish two things:
- File your income tax return.
- Pay any taxes that you may owe.
Keep in mind that the entirety of this process is for the year prior. For example, by April 15th of 2025, you have to file your tax return if you made at least $14,600 in calendar year 2024.
If you’ve ever been curious as to why there’s so many Intuit TurboTax ads during the Super Bowl, now you know. The federal deadline for your employer to send you your W-2 is January 31st, so it’s around Super Bowl time that American families start thinking about knocking out their taxes.
Tax Software
Intuit spends a boatload of money on Super Bowl ads, but be aware of another thing they like to splurge on: Lobbying the United States Government, specifically to prevent the IRS from doing anything that may hurt their tax preparation service business.
OpenSecrets has documented a ton of findings, but allow me to provide the interesting bullet points:
- Intuit has spent $47.2 million lobbying since 2003
- Some of this money was spent repressing the Direct File Pilot Program, which would allow individuals to file their taxes electronically, for free, directly to the IRS
- In 2020, the FTC launched an investigation into Intuit to understand if they mislead customers into paying for unnecessary tax filing services
- In 2022, the FTC sued Intuit, alleging that they used bait-and-switch tactics to push customers towards tax preparation products that costed money
I bring up all of this to make a simple claim: Filing your taxes doesn’t have to cost money.
When the time comes to pick a tax preparation software, we recommend using FreeTaxUSA. As of the time of this writing, filing your federal return with them is free of charge, and filing your state return costs $14.99.
Withholdings
Before we wrap up part 1, it’s valuable to cover the mechanics of how this whole process works. To understand that, we should start with the W-4.
In case you’ve never seen this document before, know that this is one of the first things your employer will have you fill out when you graduate and start your job. The W-4, also known as the Withholding Certificate, is the document that’s going to tell your employer how much money to withhold from your paychecks to send to the IRS.
The “TIP” box at the bottom highlights the IRS Tax Withholding Estimator, which can help ensure you fill out this document correctly for your specific situation. Think of these withholdings as making estimated payments throughout the year.
The act of filing your income taxes is simply reviewing the results of these estimated payments, and settling any discrepancy. You tell your tax filing software how much you’ve had withheld (from your W-2), and answer some questions to calculate your tax liability (how much you actually owe). This is why getting your W-4 correct is so important—too much withheld means you’re giving the IRS an interest-free loan, whereas too little means you could get hit with a big tax bill in April.
Final Thoughts
Filing your taxes for the first time doesn’t have to be stressful. Over the next few weeks, we’ll chip away at the daunting prospect of not just filing your taxes on your own, but also (gasp) understanding what the heck is going on. We have a whole world of tax fundamentals to work through—I’m looking forward to the coming weeks!
