OK, real talk: Is there anything more confusing than doing your taxes? It’s something we’ve all gotta deal with, but the forms, the numbers, the terms — it can feel pretty overwhelming. Tax Day is on April 18th, and it’s coming faster than we’d like. . . which is exactly why HelloGiggles compiled our thorniest tax questions and reached out to experts to find out what’s what. With our eight-part tax series, you’ll be *totally* prepared for Tax Day! First, we tackled the basics of doing your taxes; then, we went over what we needed to know about deductions, dependents, refunds, receipts, and how to file. Now, we’re moving on to how to all those other weird questions you had about taxes:
How do taxes work if you move states during the calendar year? Do you have to file twice or does the IRS know what’s up?
Your humble writer just moved from Pennsylvania to New York in February this year, and I can’t help but wonder just how confusing my taxes will be come 2017. However, experts assure us that it’s not *too* confusing. On the federal level, you only have to file once. However, for your state taxes, you’ll owe income taxes for all states in which you lived and worked during the calendar year, according to Richard Gartland, senior tax professional at H&R Block. That is, unless one of the states doesn’t have state personal income tax.
So does that mean I’ll have to pay more money next year because of my big move? No, Gartland explained — you don’t get taxed twice over. “Generally, your income will be allocated to each state based on the time you spent there,” he explained to HelloGiggles. “You may also be able to deduct your moving expenses if you are moving for work and are not being reimbursed for those expenses.”
Yay, deductions! Moving expenses, such as auto expenses, parking and tolls, lodging during the move, and storage expenses, so keep tabs on all that stuff, and above all, keep your receipts. Moving to a new state (and possibly starting a new job) is stressful enough — you deserve some cash money for it.
Why do we have to file taxes if our paychecks get taxed all year?
Taxes kinda seem pretty redundant, TBH. Our paychecks get taxed all throughout the year (as many of us know, sobbing over the dream of actually earning that considerably larger “gross income” number). So why do we even have to file our taxes, anyway? Surely there must be a more efficient way to do all this!
According to Stephanie Gruenhagen, tax attorney at Davidoff Hutcher & Citron LLP, we should consider the taxes withheld from our paychecks as just an estimate of what we should be paying in taxes. “Based on the total income you earn in a year, you may have paid too much or too little in taxes,” she explained. “Additionally, you may have paid for certain items or made donations that lower the amount of tax you owe. You file a tax return to reconcile all of these actions so you pay the correct amount of tax.”
Other countries around the world actually handle their taxes differently, explained Henry J. Grzes, CPA, lead technical manager of Tax Practice & Ethics at the AICPA. “Many countries around the world only require tax returns when you generate income that is not subject to withholding at source,” he told HelloGiggles. “However, the U.S. is not one of them. Even if your only income is from wages, and you have sufficient taxes withheld by your employer, you still have to file a tax return.”
But at least we have the chance to get that sweet, sweet return.
What happens to your tax money, anyway?
Ahh, the magic question: What does the government actually do with our taxes? Well, consider it their main source of income. “Your tax money goes to the U.S. Treasury to fund the federal government,” said Eileen Sherr, CPA, CGMA, M.T. Senior Technical Manager of Tax Policy & Advocacy at the AICP, told us. “For example, [it’s used for] interest payments on the national debt, defense and security, transportation and infrastructure, and education.”
If you want to see a detailed list of how taxes are used, you can check out the Center on Budget and Policy Priorities report and the White House taxpayer receipt. But in a nutshell, taxes are used so the government can . . . do what the government does!