Money Matters Lesson 5: Filling out Your W2

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money-coins.jpg[College kids are notorious for being poor. And why shouldn’t we be? We take out student loans to pay for private universities, can barely balance a part-time job with our full-time courseload, and the only “balance” we’re familiar with refers to the number of points left on our dining hall cards. Oh, did I mention many of us tend to splurge every extra penny on PBR’s at the campus bar?

If you disagree with everything I just said, you probably don’t need this column. But if you’re nodding along because you’re officially an adult and still don’t know how to manage your money, then you might want to pay attention every week, because I’m going to (try to) get you through this, and make you a successful saver and a wise spender.]

Congratulations! You’ve got a job! You can start making money… and the government can start taking money from you!

On your first day at a new job, you’re going to get slapped with a stack of paperwork: company handbook, sexual harrassment awareness statement, and, of course, the W2 form. How many of you have snuck into the bathroom to call your parents and ask them WTF to write in this form? Yeah, me too. Here is everything you need to know:

The W2 determines how much money in taxes will be taken out of your paycheck. Typically, dependents have the most taken out, independents are somewhere in the middle, and people who have dependents have the least. Usually, college students are either “dependents” or sole “independents.” If your parents claim you as their dependent, they are basically telling the gov’t that they support you; therefore, the gov’t sees your wages as extra cash, and will take more money from you. If you are independent with no one to provide you, the tax form says (in layman’s terms) that you are responsible for living expenses (rent, utilities, tuition, etc), but don’t have to spend your money on anything else.

If you are claiming yourself as a dependent, you fill out zero’s all across the board. You don’t even have to worry about any of the other confusing boxes or lines, and you don’t have to add anything up in the ‘totals’ column. The zero means that you are providing for zero people, including yourself. If you are an independent, you claim ‘1’ because you are providing for one person: yourself.

At the end of the year, when you fill out your taxes, you will declare roughly how much you spend in a year, and the government compares it to the amount of money they took out of your paychecks. If they took out too much, guess what! You get a big, fat tax return. If you made considerably more than you had to spend, they might slap you with bill to give them even more of your money.

What does this mean in the long run? A little tip: if you provide for yourself, and you fill out zeros on your W2 (like a dependent), the government will take a large sum of your hard-earned money every week. But on the bright side, when you do your tax forms, you can change your standing to “1” and say that you had to provide for someone, all while they were robbing you of your income. Usually, this will result in a nice big tax return in February.

That’s a decent chunk of change to put towards spring break.

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