In high school and college, most students learn a lot about geometry and calculus but very little about taxes and investing.
In fact, when tested on financial concepts, only 17% of respondents ages 18 to 34 demonstrated basic financial literacy, according to the FINRA Foundation’s 2018 National Financial Capability Study. It could partly be a lack of exposure. Just 29% of those surveyed by FINRA said they’d been offered financial education at a school, college or workplace.
A lack of personal finance education can make navigating money decisions even more intimidating, especially in the face of a $1.5 trillion student loan debt crisis and possible recession on the horizon.
Here are four important personal finance topics you might not have learned about in school:
“Taxes are a mystery to most of us,” said Billy Hensley, president and CEO of the National Endowment for Financial Education, with a laugh. “Demystifying the language around it is a huge step.”
Those who don’t earn enough in income aren’t required by law to file a federal tax return, but you may want to file anyway because you may be eligible for a refundable credit.
If you have a simple return – where you take the standard deduction, have taxes withheld from your paycheck by your employer and have limited income from stocks or interest and dividend income – then you likely qualify for a free simple federal tax return.
Most major tax preparers, such as TurboTax and H&R Block, offer a free-file service. Here are a few more things you should know about taxes:
- File on time: Even if you can’t pay the full amount, you should file your return by the deadline. Most taxpayers have until April 15 to file. If you owe the IRS, there’s a late-filing penalty of 5% per month, up to 25% of your unpaid taxes. The IRS has payment plans if you can’t pay everything you owe immediately.
- Know what a deduction is: Deductions reduce the amount of income you have to pay taxes on. If you qualify, you can get tax deductions for student loan interest or medical or dental expenses. Even if you have no other tax deductions, the IRS allows you to take the standard deduction which reduces the amount of income you have to pay taxes on. For tax year 2019, the standard deduction is $12,200 for single filers.
- Your W-4 determines your refund size: The W-4 form from your employer calculates how much tax to withhold from your paycheck. If you withhold too little, you might owe when you file your tax return. If you withhold too much, you might get a refund, but you’ll have to live on less of your paycheck during the year. The IRS offers a calculator to help you figure out how much to withhold.
Click here to read more.
SOURCE: USA Today, N’dea Yancey-Bragg