Wednesday, April 10, 2013


So I tried to file my taxes today. I say tried because, yet again, they needed information I didn't have. That's a whole other story.

What I wanted to talk about was my struggle with getting a refund.

I work two jobs. I work two jobs because my primary job as a graduate student doesn't very well. That's not really a surprise, but what is frustrating is that I still owe the government money. Because of this, I was looking for ways to generate a tax credit so I didn't owe them as much.

It's not that I am trying to cheat the system, but there are ways to pay less on your taxes, ways that are totally legit.

One such way is by making a contribution to a Roth IRA or an IRA. I might be a bit fuzzy on this, as it seems the Roth IRA might not give you a tax credit according to some websites, but taxACT was all set to remove my contribution from my taxable income until it determined I was a full time student.

My mother, who happens to be an accountant and knows her stuff, has been pushing me to make a contribution to my Roth IRA for several years now. So this year was to be the year; I was finally going to do it.

For those of you without accountants or financial advisors in the family, an IRA is basically a private retirement fund. It earns interest and, with a Roth IRA, you don't have to pay taxes on the money you contribute, so long as you leave it in there until after you reach retirement. It's a pretty sweet deal, if you can actually afford to put money away, knowing that you can't access it for years without a penalty.

Turns out though, because I am a full time student, I am not eligible for a IRA contribution tax credit. So what that means is, the government won't give me a tax credit for putting money in my personal retirement fund. I would still get the money when I hit retirement age and it will still be earning me interest until then, but I am not able to get the immediate benefit of that contribution being non-taxable income. On this particular return, the amount I would have saved was 10% of the contribution.
TLDR; Taxes are dumb.

I am aware that as a student, I don't make a lot of money. I'm aware that most students might not have the ability to put ANY money away, especially into an account they can't access for many, many years. Does that mean I shouldn't still be encouraged to make that contribution if I am able? Why should being a student take away that credit from me? THIS JUST MAKES NO SENSE.

Anyway, the point of all this is that taxes are dumb. There are so many rules and regulations. That's why we need people who take classes on this stuff year 'round just to help us make sense of it all.

Don't get me wrong, I don't want my mom out of a job or anything, but I think we need to take a good, hard look at our current tax system. Frankly, it needs some work.