A College Student's Guide to Tax Season
A new season is upon us — and I am not talking about spring.
It’s tax season folks, and if you are like me-from-a-month-ago, you probably know close to nothing about it. But thanks to the internet and The Rec’s helpful accountant, I have compiled a list of common questions and answers to help you navigate through your taxes this year (or at least be prepared for next year).
How do I even know if I need to file taxes?
Basically, if you are earning any income, you are required to file it with the federal government. Whether it is a part time job or freelance/contract work (I’ll get into the freelance specifics later), you have to report it. Your parents can file you as a dependent and claim all of your income, or you can file on your own.
How long can my parents claim me as a dependent?
Your parents can claim you as a dependent until you are 19. However, if you are a student, you can be claimed until you are 24. More information from the IRS can be found here.
How do you go about filing them?
You can either do it yourself (through TurboTax or a free government service), or hire somebody to do it.
What forms do I need to receive and fill out?
The service you use or the person you hire will ask you disclaimer questions to help figure out what forms you need, but here’s a list of the important ones so you have an idea of what you need:
W-2: You receive this from your employer in late January. It contains any taxes that were withheld from your paycheck. If you do not receive one, contact your employer to confirm they sent it to the correct address. If you have multiple jobs, you receive a W-2 from each employer.
Form 1098-T: This is your tuition statement, which your university provides. You can access it under your AU Access account, under the My Finances tab, My Finances, and then 1098 Tax Information. It has the information that you need to claim education credits. For example, tuition paid, related expenses, any scholarships or grants you received, and any adjustments from the previous year. It also has the information on deducting student loan interest.
Form 1098-E: You need this to deduct any interest you paid on a qualified student loan during the tax year. If you paid more than $600 in interest, your lender should send you this form.
Form 8863: You need this to see if you qualify for education credits such as the American Opportunity Credit and the Lifetime Learning Credit.
1099: You should receive this from companies that hire you for freelance work. If they pay you at least $600 in a tax year, they should send this to you and to the IRS.
W-9: When you do freelance or independent contractor work, this is what you fill out in order to provide the company with your SSN. This is what allows them to send you and the IRS a 1099 at the end of the year.
1040: There are multiple types of 1040 forms you fill out depending on your situation. More information on which kind you fill out can be found here.
Are scholarships taxed?
Your scholarships, grants, and fellowships are tax-free EXCEPT for any portion that you use for expenses other than tuition, required fees, books, supplies, and required equipment. For example, you need to report living expenses such as rent or food as taxable income on Form 1040.
What paperwork do we need if we do freelance, commissions, or work as a contractor, and how do we know if we are supposed to file taxes?
If you earn $400 or more in net income (net income is equal to income minus expenses) a year from freelance or commissions, you have to pay self-employment taxes. You should get 1099-MISC forms from the companies who have hired you at the end of the year.
Some companies pay freelancers with online payments, which means they would issue you a 1099-K instead of a 1099-MISC. However, companies do not have to do this unless they pay you more than $20,000 a year or 200 times. In this situation you would need to claim your earnings on a Schedule C form (of the 1040). More information can be found here.
How do taxes work for out-of-state students who work in Alabama but have their permanent address in a different state?
You only have to file taxes for a state if you earned income there. For example, your permanent address might be in Florida, but you go to school and work in Auburn. In this case, you only need to file taxes for the state of Alabama. If you had a summer job in Florida and a job in Auburn, you need to file for the amount you made in that state for that state. If you made $5,000 in Florida and $15,000 in Alabama, you file $5,000 with the state of Florida and $15,000 with the state of Alabama.
Extensions
If you file an extension, you do not get penalized; you just pay the added interest. You DO get penalized if you file late without getting an extension first. If you hired an accountant and you need an extension, get them to file for it. More information is available here.
Do international students have to file federal and state taxes?
You are still supposed to file Federal and State Income taxes if you are an international student. You can find more information and paperwork here.
Aren’t we already paying taxes automatically out of our paychecks?
Your end of year taxes are the previous year’s taxes due plus any interest. This is why it is better to opt to take out the most taxes on the front end (apply for less deductions when you are initially filling out paperwork for a job).
How long does it take to find out if you owe or will receive money back?
After you file your paperwork, it typically takes anywhere from 1–6 months for you to receive money back. Federal tends to be faster than state.
If you owe money, how do you go about paying it?
The IRS offers options to file online by E-filing and also lets you pay electronically what you owe. You can also pay online or by phone with a credit or debit card. More information is available here.
What if I do not have enough money to pay back all of my taxes?
According to the IRS, you should still file your return by the deadline, pay as much as you can, and call the IRS to discuss payment options. They have different options as far as how to pay it back. The most important thing is that you still file and contact them immediately.
Here is a link to essential resources on how to get the most out of your tax return for those filing taxes in 2021.
Have any more questions about filing your taxes? Comment below. Welcome to adulting!
Be well, Auburn.
Photography by Grace H.