Personal finance education is lacking in American schools, which may cause problems for graduates later in life, CNBC Make It reported.
Only 25 states guarantee a standalone personal finance course for students before graduation, according to Next Gen Personal Finance. A consequence may be the inability of many Americans to file their personal income taxes—which even professionals can find challenging.
“I am a tax accountant and I spent five years of additional education after high school and an additional eight years in public accounting to understand taxes, and it still would be difficult for me to do my own taxes by hand,” said Abby Donnellan, a CPA and senior tax strategist at Moneta, in an interview with CNBC.
She recommended a number of steps that taxpayers can take to complete their tax returns on their own.
Once taxpayers have assembled their documentation, such as W-2s and 1099s, they should “follow the instructions,” that [the] IRS provides, which will also help to determine the correct form for the taxpayer to use, Donnellan said. “There are a lot of forms on the IRS [website] that can help you determine what your taxable [income] amount is. You’re not having to pull tax rates and actually calculate that.”
She also advised taxpayers to be aware of what constitutes ordinary income, which is taxed at the marginal tax rate, and other sources of income, such as capital gains or freelance income, which are taxed differently. She also advised looking for tax credits, such as the Child Tax Credit (CTC) or the Earned Income Tax Credit (EITC), as well as deductions that can lower one’s tax liability.
Taxpayers could also benefit from the advice of a tax professional or tax preparation software, either of whom could find potential deductions and credits, she added.
The IRS also provides free filing options, such as Free File for those with an adjusted gross income (AGI) of $79,000 or less, and Direct File, for those in one of 12 states who have relatively simple returns.
The IRS’s Volunteer Income Tax Assistance program (VITA) provides free tax services for those who meet certain criteria, such as earning less than $64,000 a year, and possessing disabilities or limited facility with English.