In addition to studying for finals and finishing projects for the spring semester, students have one more task to accomplish in the next week — filing their tax returns.
For many students, tax season can often bring stress and confusion. But Jackie Perlmen, senior tax research analyst for H&R Block, said that most of the time students don’t know whether they have to file or not.
“A lot of students are very surprised to know their income might be taxable,” Perlmen said.
In seven days, Americans across the country — students included — will scramble to finish their tax returns before the April 15 midnight deadline.
In addition to her job as an analyst for H&R Block, Perlmen also travels the country speaking to students about taxes and important steps to keep in mind when filing. She said she receives many excuses from students as to why they don’t file their taxes, such as, “I’m not 21,” “I don’t like the government, so I am not going to give them my money,” and “I’m a student, and I don’t need to pay taxes.”
Perlmen said all these excuses are common, but what needs to be understood is if a student’s income meets the requirement for filing, it is against the law not to file.
“Students need to understand that Congress and the president make the tax laws, not the Internal Revenue Service,” she said. “The IRS enforces the rules, and if students don’t file, they are breaking the law and could go to jail.”
Perlmen said one of the first things for students to keep in mind is whether their parents have claimed them as dependents. According to the IRS “Tools for Students” Web site, a dependent is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption.
“There are several factors that consider one a dependent,” Perlmen said. “Age could be one factor, but a student should ask Mom or Dad.”
After finding out if the student is a dependent, Perlmen said, the next step would be to figure out the threshold, or filing requirement for that student.
Perlmen said if a student is a dependent and his or her unearned income (as in stocks or interest earned on a savings account) is more than $250, the filing requirement is $750. If a student has unearned income of less than $250 and is a dependent, the requirement is $4,700. If a student is not a dependent, his or her requirement is $7,700, she said.
“If the student is under the requirement, they don’t have to file but should because they can get money back,” Perlmen said. “If they go over the threshold it is required that the student file their taxes.”
There are two different incomes that make up the filing requirement. Perlmen said that there is earned income, which is what a student would receive from a job, as well as interest/unearned income, which includes stocks or interest earned in a bank account.
In addition to the types of income that are taxable, students have an added bonus when going to college, Perlmen said. In most cases where a student is providing his or her own income to pay for school, it is taxable. The only case in which school would not be taxable is if a student received a scholarship that paid for his or her tuition and books.
“The law used to be that a student couldn’t get a deduction until the student got out of college and started to pay back their loan,” Perlmen said. “Now they can get a deduction of $2,500 anytime for their student loans.”
Perlmen defined a deduction as something that reduces the tax income, but students who pay their own way in school can also receive credits that reduce the actual tax withheld.
Independent freshmen or sophomores, or parents claiming freshmen or sophomores as dependents, may qualify for the $1,500 Hope Scholarship Credit. An alternative credit is the Lifetime Learning Credit, which is for students beyond their sophomore year who qualify for up to $1,000. Those students who do not qualify for either the Hope or Lifetime tax credits based on their income may benefit from a new tuition and fees deduction of up to $3,000.
“The important thing to remember is that the student cannot be paying tuition by a scholarship to receive these credits,” Perlmen said. “They also must be attending an accredited school in the United States.”
Perlmen suggested those who are confused as to which income filing requirement they meet and how their income is comprised should visit an online tax preparation class, such as the one H&R Block offers on its Web site, or check the college catalog for a Tax 101 class. USF offers one, but it is only available for business majors. Students who are interested can get special approval, according to the USF schedule of classes.
“These preparation classes would tell you first if you need to file and what is required of you to file,” she said. ” For example, the preparation will tell you if, as a student, you are a resident of Florida and whether or not you would have a state tax requirement, in addition to a federal requirement for filing.”
After finding out what has to be done when filing tax forms, Perlmen said the next step is to decide how to file them. Taxes can now be filed via the Internet and the return electronically deposited in the bank. A student can also file his or her taxes on the phone, buy software that helps file, or visit the IRS Web site to file online. The online filing is based on income and is free.
“Most of the software that is out now gives help sessions and guides the tax payer in the filing process,” she said.
However, the fastest way is to hire an accountant.
“That is not the cheapest way for students, though,” Perlmen said.
Perlmen said some colleges offer a “vita” program that helps students do their taxes on campus.
“The student should check with their college to see what is offered,” she said.
For more information on tax filing go to H&R Block’s Web site www.hrblock.com.
For the IRS “Tools for Students” go tohttp://www.irs.gov/app/understandingTaxes/jsp/s_student_home.jsp.
For infromation on the IRS go to www.irs.gov.
Contact Stefanie Greenat firstname.lastname@example.org