Tax Tips

For assistance on tax matters, there are several free or low-cost options. A local library, tribal college, tribal business information center (TBIC), community center, or Native CDFI may offer free tax workshops, while many state certified public accountant (CPA) societies occasionally offer free help to taxpayers. In addition, the IRS offers free tax help to certain people through the Volunteer Income Tax Assistance (VITA) Program and the Tax Counseling for the Elderly (TCE) Program.

Here are some tips to share with your students to help make tax preparation and paying a little easier.

Withholding

Although it may be tempting, encourage your students to avoid withholding too much money from their paychecks. Although such a strategy usually results in a large refund, it really represents an interest-free loan to the government.

Tax Preparation Checklist

To help make paying taxes a little easier, here is a checklist your students can use to be sure they have the information necessary before they get started. Having all the information in one place will make the job a lot easier—and quicker.

• the “W-2 Wage and Tax Statement” you receive from your employer
• any 1099 Forms you receive from your bank, investment company, and anyone else who pays you money
• receipts from child-care providers
• receipts for any gifts to charities
• health insurance and medical bill receipts
• mortgage interest paid
• federal tax return forms and instructions
• state tax return forms and instructions

Tax Refunds

If your students expect a refund, help them resist the temptation to use a service offering rapid refunds. These are very often short-term loans that carry high fees. By using one of these services, your students won’t get all of the money that is owed to them.

Instead, they will pay a large percentage of it just to have access to the rest of their money more quickly.

Tax Issues for the Self-Employed

Because self-employed individuals don’t have an employer withholding income taxes with every paycheck, they need to pay their income taxes quarterly. It’s a good idea for your self-employed students to estimate the amount of income tax they will owe for the year, divide it by four, and pay that amount each quarter. To do this, they will need to set aside a certain percentage of the money they earn and keep it in an account so their taxes can be paid on time each quarter.