Once upon a time, several days before I graduate from college, I learned that I had won two awards from the Smith College Department of English for a poetry manuscript I had written as a part of an independent study project I did with poet Annie Boutelle. Professor Boutelle had encouraged me to apply for these awards, but I assumed I could not win them since I was not an English major. Imagine my surprise when my name was announced – twice – during the awards ceremony! I went over to the awards table at the end to pick up what I assumed would be some kind of plaque, and turned out to be a nice check. Imagine my surprise to learn that Smith has over a dozen endowed poetry prizes.
At that time in my life, I knew nothing at all about taxes. I put 1/3 of the prize money away, assuming the taxes I would owe on it would be about that amount. (I didn’t even know how to figure out my marginal tax rate – ha.) When tax season came around the next year, I received a W-2 from Smith for hourly wages I had earned as a work-study participant. The prize money was not included on the W-2. I had no understanding that “income” might be reported under any other form – here, a 1099 form. When my mother’s tax accountant (who was helping me fill out my return) asked if Smith had reported the prize money I gleefully said no. I used the amount I’d saved to put down the deposit on an apartment lease in Brooklyn.
Two years later I got a letter from the IRS informing me Smith had reported the prize money and my return from that previous year were therefore incorrect. “You owe us $XXX,” the IRS told me. Oh. Crud. Since that time my tax returns have filled me with anxiety and I’ve paid $200 every year to have my tax returns prepared for me.
This year, though, with a semester of Federal Income Tax I and another 2 months of Taxation of Financial Instruments under my belt, I prepared my tax return myself for the very first time. Although I used TurboTax, which gives you a lot of guidance, I truly understood how to report my income items, look for exemptions/deductions for which I was eligible, and apply for certain tax credits. I never expected that law school would turn around how I think about taxes, but it really has. It felt great to do the return myself, and to feel confident that my return was filled out correctly. This set of skills and knowledge was not one I expected to gain going into law school, but it’s great!