A dozen tax tips for
in college, doing your taxes feels like one more final exam. But there's one big
difference. This grade is measured in cash.
little research and time, you can ace this test and maybe even earn a nice check
in the process. Here are 12 tips to help you over the rough spots and make this
tax exam a little easier.
Sure, you might make too
little money to file, but if you've had money withheld from paychecks, you've
got a refund coming. "The most common error is that people don't realize
'it could make a lot of sense for me to file even if I don't have to,'" says
Mark Oleson, director of the Financial
Counseling Clinic at Iowa State University.
Even if you haven't received your W-2s, your final pay
stub will have the pertinent tax information, such as your income and how much
was withheld. You also can go online and download state
and federal forms you'll need. Taking an advance look at your tax situation will
help you know which issues might apply to your return.
you might need a little help? It's probably closer than you think and possibly
free. Most college accounting departments have students offering free tax help
so they can get some practice with real-life returns. If you haven't seen ads
around campus, contact the accounting or business department and find out how
you can get some advice. The Internal Revenue Service also offers in many communities
Volunteer Income Tax Assistance sites where you can go to get help from IRS volunteers,
Remember, though, the closer you get to April
15, the longer the wait for help. Jace Sanders, a financial adviser for Albuquerque-based
Financial Planning Inc., still regrets waiting until the last minute the first
time he sought on-campus help in college. He stood in line for two hours. But
it was worth the time, he says. "They advised me of the Hope Credit."
sooner you start, the better off you'll be," advises Oleson. "If you
have a tight spring schedule and can't talk to someone for three weeks, saying
that on Feb. 1 is a lot different than saying that in April."
Give yourself a weekend
No, filling out your forms won't take that
long. But if you allow a weekend, you'll have time to take a few breaks when you
get tired and still be able to double check the numbers before you mail that return.
says his first college return took the better part of a weekend. "I got off
work Friday, and Monday I was still finishing it up," he says. Even so, he
neglected his earned
income credit. "And the IRS isn't going to say, 'Here's some extra money
you want to take.'"
Oleson recommends you take a leisurely
weekend to do your returns. Then take the next week to seek any outside help and
ask more questions. Next weekend, check your numbers again and send it.
Practice on paper
Even if you're filing
electronically, many students find it's more efficient to fill out the paper
forms and work out the bugs before they go online to file, says Oleson.
Take extra credit
These days, college students (or parents paying college
tuition) are getting a little help from the government in the form of credits
and deductions. While there are three major ones, students (or their parents)
get to select only one per student. And whoever claims the student as a dependent
is the one who is eligible for the credit. Pick the one that best suits your family
- Hope Scholarship
Credit -- Gives you a tax credit for up to 100 percent of your first $1,000
in tuition and fees and up to 50 percent for the second $1,000. The maximum credit
is $1,500 and it applies to the first two years of college only.
Lifetime Learning Credit -- Gives you a
tax credit equal to 20 percent of your tuition and certain related expenses up
to $10,000. The credit maximum is $2,000.
education expenses deduction -- This
deduction could be as much as $4,000 for families that meet earning guidelines.
If you make too much (in the IRS's eyes), you'll get a reduced deduction. The
downside: Deductions usually give you less bang for your buck than credits. You
get to subtract a credit amount from the actual tax you owe, whereas a deduction
reduces the income you pay tax on. So in this case, even if you have $4,000 in
expenses you can claim on your tax return (at the bottom of page 1 of your Form
1040), in reality this deduction would at most produce a $1,000 reduction in your
tax bill if you're in the 25 percent tax bracket.
Understand your family's financial situation
Talking to mom and dad about
money is almost as difficult as talking to them about sex (and just about as much
fun). But you need to know a little about their financial picture to plan who
should claim you as a dependent and possibly use your education credit or deduction.
If your parents are paying more than 50 percent of your expenses,
they are entitled to list you as a dependent on their taxes.