Thursday, March 17, 2016

A student's guide to filing taxes

For many college students, tax season can be intimidating if they are unsure how to properly fill out the forms.
Most students are also hoping to get as much money back from their return as possible. 
There are only a few things students need to remember to make tax season a success.
This form is received by the taxpayer from their employer or employers and details taxable wages as well as federal and state withholding from the past year. 
This form is received by the taxpayer from the university or college the student is attending. It will detail all money paid to the institution by the taxpayer for tuition in the past year. This information can be used later in the process to potentially earn some tax credits. 
These forms are all regarding income made outside of wages, otherwise known as “investment income.” Investment income includes, but is not limited to, money made by the taxpayer from interest, dividends and trust funds.
Form 1040 (or 1040 EZ, if qualified)
This is the federal tax return form that is sent to the IRS. This form is the responsibility of the taxpayer to fill out and file. If qualified, taxpayers can choose to fill out the Form 1040 EZ instead, which is a simpler version of the Form 1040.

One of the first things students need to do before filing a tax return is find out if they will be claiming themselves as a dependent or if they will be claimed by their parents.
To find out whether or not they can be claimed as a dependent by their parents, students must analyze how much support they are receiving. Students can qualify to be claimed by their parents if they receive at least 50 percent support for all living expenses.
Tax credits can be used by taxpayers to lower the amount the government requires them to pay into taxes, and there are certain ones exclusively available to college and university students. 
One tax credit available to student taxpayers is the American Opportunity Tax Credit, which can award a taxpayer up to $2,500 in tax credits. This means the federal government will match total yearly tuition payments of up to $4,000, with the first $2,000 being a dollar-for-dollar credit and the remaining $2,000 being a 25 percent credit. Students who claim themselves as a dependent can claim this credit for themselves. For students whose parents claim them as a dependent, the credit will go to the parents.
Students can also list other education-related expenses, such as textbooks, on their taxes to be added onto the tuition payments. These taxes can raise the amount one can be credited from the American Opportunity Tax Credit, but if the tuition paid is already higher than the $4,000 maximum no change in credit will be made. 
For students who claim themselves as dependents, there are separate exemptions from taxes that students whose parents claim them do not have. Self-dependent students do not have to file a tax return as long as their gross income is below $10,300, and therefore do not owe any taxes. 
A student in this scenario, however, can still receive the American Opportunity Tax Credit, and since it will not be used towards taxes since the taxpayer does not owe any, the student can be awarded up to $1,000 on their return from this tax credit. 
For students looking for help in completing their taxes, there are many services readily available. 
TurboTax is a popular website used by taxpayers to quickly and easily fill out the required information.