Do you have a child going away to college for the first time? Or, maybe you are a college student yourself. For the former, it’s often the first time they are living away from home and family with all the new responsibilities that entails. For the latter, there are many new tax concerns that transcend the simple tax return you filed during your high school years.
Common mistakes can mean a smaller refund than you are owed, or worse, leave you owing penalties and back taxes. Here’s a countdown of the most common errors:
#5. Not filing a return for multiple states. If you are attending school out of your home state and take a part-time job during the school year, you will have to file a return for that state as well as your home state – in most cases even if you earned no income in your home state. You don’t have to pay twice, you just have to do the paperwork for both taking a credit at home for the out-of-state taxes paid.
#4. Claiming yourself when your parents already have. If you are a full-time student under the age of 24 and your parents pay more than 50% of your support, then you are still a dependent. Parents don’t have to claim you, but be clear about who is taking the deduction.
#3. Not taking advantage of education deductions and credits. Whoever is paying your tuition (including yourself!) can claim education related deductions for tuition and fees, or credits in the form of the American Opportunity tax credit or the Lifetime Learning tax credit. You may also be able to deduct a portion of your student loan interest. Be sure to get professional guidance on this one, as you can’t take them all and you can’t be a dependent on your parents’ return (see #3 above), in which case, it’s the parent who can benefit here.
#2. Not filing a return at all. If you are a single dependent and earned less than $6,100 total for the year, then you don’t have to file a tax return at all. But if you had taxes withheld by an employer, file anyway, as you may get all your money back! On the flip side, don’t assume that just because you’re a student you can claim exempt on your W-4, because (surprise!) you may end up owing money instead of getting a refund.
And the #1 mistake made by college students on their tax returns? Listening to friends’ advice regarding taxes. Most of the above mistakes occur when friends give friends advice that turns out to be wrong.
Keep in mind, this is just a quick overview of the most common mistakes made. Your best bet, as always, is to check in with a tax professional. Call us, we can help you get it right the first time.