 "Photo: Elizabeth Sorrell")
The time is now for students and parents to take advantage of commonly forgotten tax deductions as well as some new credits available.
On April 15, tax returns must be filed. Many people will miss out on the opportunity to lower their taxable income or their overall amount due in taxes. Don't be one of them.
Filing taxes can be a pain, but it doesn’t have to be. With the help of official websites and legitimate professionals, students can learn the ins and outs of taxes. When done accurately, hundreds (even thousands) of dollars can become untaxed or credited towards education.
One of these benefits is the American Opportunity Credit, which is an upgraded version of the Hope Credit. If parents or students make less than $80,000 a year ($160,00 for joint filers) they can receive a credit of up to $2,500 to help pay for education. It used to be $60,000 ($100,000 jointly) or less under the old credit.
This credit can now be claimed for the first four years of post-secondary education, rather than only the first two years.
Even if one doesn’t owe any taxes, they can gain the maximum of $1,000 in credit, which has never been possible before. If students are already paying interest on loans, the Student Loan Interest Deduction will knock off another $2,500 per year.
Paul Ralphs of H&R Block said it’s crucial to accurately fill out the W-4 (indicates the amount of taxes taken out of paycheck) while paying close attention to the instructions that come with it. He said the major problem is people claim too many exemptions or reductions on taxable income.
“Don’t rely on what others are claiming,” said Ralphs. Even though students seem to be in the same circumstances, the form is unique to every individual. “The name of the game with taxes is to pay the right amount.”
For those who have trouble holding onto their money, Ralphs said they sometimes request an additional amount to be taken out of paychecks (line 6 on W-4) and rely on their return for their savings.
History major Kirk Skully said his father does his returns for him. “It’s like you get the forms in the mail with three different papers. One for you, one for federal and another for state. Then wonder, "What do I do with these?"
Fortunately for Skully his dad is an accountant. “I could do the basics but wouldn’t know all the details, all the little tiny tax credits like he does,” Kirk said.
Students can also collect the Earned Income Tax Credit, which is created for those with a low to moderate salary. The requirements are strict, but figuring out how to qualify is easy.
This credit can range anywhere from $457 to $5,666 depending on status, age and qualifying children.
Shelbi Schroeder, fine arts major and transfer student, said she doesn’t even know where to start. “I wish they had a checklist to follow, so I know exactly what the hell I’m doing," said Schroeder.
Since she attends HSU through the Western Undergraduate Exchange Program (a program where students receive discounts on tuition if from a western state), Schroeder can’t become a California resident. This means she should file a nonresident or part-year tax form.
According to California’s non/part-year resident tax liability law, this does not inflict additional taxes on Schroeder.
Instead, the Franchise Tax Board would use the “taxpayer’s total income from all sources to determine the rate of tax and then use the applicable ratio (or percentage) to determine the California tax.”
With all these different rules and regulations, it seems impossible to understand. But websites such as irs.gov, hrblock.com and ftb.ca.gov provide answers.
To better understand taxes, the Internal Revenue Service's website has a section for students that teaches the “how” and “why” of taxes. It includes activities and a glossary of tax terms.
Ralphs said the best thing to do is talk to a professional about concerns with filing taxes. “Each case is different. It all depends on motives, plans, claims and living situations.”
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