Guest post by Kari Grittner a full time accounting instructor.
With recent changes to tax filing procedures, compounded by the fact that the average American spends more than 24.2 hours filing taxes, it is crucial that college tax filers learn time-saving and stress-reducing tips during tax season. Here are five simple tips that will teach you how to master tax preparation in 2010.
1. Every Day is Tax Day
The most important tip has nothing to do with the tax code, but rather organization and preparation.
According to the IRS, the most common tax errors include:
- Calculation errors
- Incorrect social security numbers, filing status, and mailing address
- Missing documents such as the W-2
- Sending the IRS your only copies of forms
- Failure to sign and date the return
A good tax organizer can be found online. It will help keep track of income, deductions, and credits. Some sort of box or filing envelop is also useful to accumulate tax documents throughout the year. Also, start your taxes early in the year and work them out on paper before filing forms. It is a good idea too to keep copies of your tax documents for at least three years. Organization and preparation are the keys to avoiding common tax errors.
2. File, File, File
Even if your income is not high enough to require you to file, if you had taxes deducted from your paycheck you must file to get those taxes back. It is a simple process and will be well worth your time. Check your W-2 to be sure taxes were deducted from your paycheck. On the other hand, if you worked under the work study program and did not receive a pay check the money you earned is still taxable and you may owe taxes on it.
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3. Don’t Automatically do the EZ Thing
Check the tax forms to determine which form will allow you to claim the most in deductions and credits. For instance if you have a dependent you cannot file the tax form EZ.
4. Find Free Help
At this time of year there are many free tax services. Check your college business or accounting departments for classes or students offering help. The IRS also has many local volunteer sites as well as free e-filing if you qualify. Don’t wait though. These services fill up quickly and if you wait until March you may be left to do your taxes on your own. Warning: when you use the internet to e-file beware of phishing scams. These are scams asking for personal financial information by folks posing as the IRS. Any suspected phishing scams should be forwarded to firstname.lastname@example.org.
5. Take the Extra Credit
There are many credits college students may claim. A credit reduces your tax liability dollar for dollar as opposed to a deduction which reduces taxable income. Check www.irs.gov for information concerning the Hope Credit, Lifetime Learning Credit, and the Higher Ed expense deduction. Keep in mind there is only one credit available per student per year and if you are claimed as a dependent on another person’s tax form they are eligible for the credit, you are not. Likewise, in determining education expenses, you cannot use expenses paid with section 529 monies as part of total education debt. If you paid interest on unsubsidized loans up to $2,500 may be deductible. This is true even if mom and dad paid the interest. It is seen as a gift to the student so the student may deduct the interest. The student does not even have to file a form 1040, the interest is deductible even if deductions are not itemized.
New credits for 2009:
First time and repeat homebuyer credits
- For homes purchased in 2009 and before May 1 2010 the maximum credit is $8000
Education Expenses credits
- Hope, American Opportunity Tax Credit, and the Lifetime Learning Credit
New Vehicle Deduction for qualified sales tax
- Allowed on qualified vehicles purchased between February 17 and December 31
- Exclude the first $2,400 from taxable income
Haiti Earthquake Contributions
- Deduct contributions made between January 11 and March 1
- Allowed for certain energy related upgrades to your property
If you think you may qualify for any of these new credits check the IRS website.
Author Bio: Kari Grittner is a fulltime Accounting Instructor on the Eagan, MN, campus. She joined Rasmussen in the spring of 1992 and teaches accounting degree courses on the Eagan Campus as well as accredited online college courses. Kari has been the subject matter expert in developing several online management and accounting courses. Kari is not affiliated or endorsed by LPL Financial.