“The only things certain in life are death and taxes”. This famous quote by Benjamin Franklin sums up most people’s feelings every year. But tax time doesn’t have to be a herculean feat of numbers and itemization. If you utilize online tax preparation websites such as turbotax.com and taxhawk.com, they can help you with itemizing and combining numbers. At the end of your number crunching, there are two outcomes: you get money back from, or you owe money to the IRS. Most people that file on time every year will get a tax refund and won’t owe anything.
Your refund amount can vary greatly so it’s best to try and add as many deductions as you can. These include buying a new house or car, making charitable donations, having children and attending college. Yep, attending class can boost your refund amount. To learn more about what a preparer can deduct, The Globe contacted Pamela Sales, Tax Specialist at H&R Block in Germantown, MD for further insight. To start, there are several forms you will need: 1098-T, 1098-E and 1099-Q, she said. “Forms needed to claim education tax breaks include bills from the educational institution or anything else that itemizes what you paid or received loans for versus what was covered by scholarships or other financial aid. You can find the tuition charged or billed and scholarships received on Form 1098-T.” she said. She continued, “Your student loan interest statement is Form 1098-E. And any distributions from a 529 plan or Coverdell Education Savings Account will be on Form 1099-Q”, Sales said. Usually, your institution will offer your 1098-T form online or by mail, shes said. You can find your 1098-E on the websites of your loan distributors, and the 1099-Q is usually offered by an employer or bank, she said.
Claiming education tax breaks can greatly increase the amount of your refund, said Sales. The American Opportunity Credit and the Lifetime learning Credit are just two of the credits offered by the IRS, she explained. “The tuition and fees deduction helps reduce taxable income by up to $4,000. The Lifetime Learning Credit is worth up to $2,000 per return for post-secondary degree programs”, she said.
So when is a taxpayer required to file a return? “Generally, anyone earning income should consider filing a return. However, filing requirements depend on a combination of circumstances, including filing status, income and age. For individuals just starting out, one of the biggest determining factors will be whether they are claimed as a dependent by their parents. This means taxpayers with nearly identical circumstances may have different requirements” said Sales. Just because your parents claim you as a dependent, you had a summer job, you got paid for weekend volunteer work, or because you’re under 18 are not definitive reasons for you to file or not file a tax return. Your best choice is to consult the IRS website, or contact your local IRS office.
The deadline for filing your taxes is April 15th each year. The date you can start sending your completed taxes to the IRS by mail or electronically can be different every year. This year, the start date was January 31st. These dates are important, but to maximize your tax filing experience, you and your parents (or guardians) should be aware that tax filing dates are different from FAFSA filing dates and deadlines to qualify for school and state scholarships. A good rule of thumb is to get in the filing frame of mind by the second week of January in order to give yourself time to qualify for everything. Remember, nothing is more certain than taxes. You might as well make it work in your favor.