You just landed your dream job and you’re looking forward to getting some moolah to tuck away for next spring break or a generous shopping excursion. But wait, isn’t there something you’re forgetting? Or maybe, you began interning last year and your parents are starting to mention a certain word more and more… Here’s everything you need to know about filing your taxes as a college student.
1. Plan waaaaay ahead
Like, more than you would for that class essay. Confirm early on when the IRS has declared Tax Day to be (traditionally, Tax Day is on April 15, unless it happens to fall on a Saturday or Sunday, in which case the deadline is usually moved to the next business day); this year, the Internal Revenue Service announced that it was on Thursday, April 15, 2021.
In early January, the IRS announces an opening day—this is the date when all taxpayers can start filing their taxes. Exciting stuff, right? It’s almost like a holiday. This year, that day fell on February 12.
Once you start filing your own taxes, you’ll need to keep records throughout the year, though. There’s no way you’re going to remember a donation you made last January or February, so consolidate all that information into a paper or digital file and keep adding to it! For example, you may have unreimbursed expenses from your university or job or receipts showing how much you spent on textbooks, utilities, etc. throughout the year. If you make charitable donations they may qualify you for a tax deduction, but you need to provide qualifying documents showing you actually made the donation. By the time tax season rolls around, you should have all the information you need.
2. Know what qualifies you for deductions and credits
A.K.A. fancy words that mean you pay less taxes.
We’re all broke college students, so when it comes to paying taxes, getting a refund makes a big difference. Some definitions first: deductions lower the amount of taxable money you owe, and credits directly cut your tax bill. You should refer to the official IRS website to find out specifically what you may qualify for. For example, there are tax benefits for education, so if you are using some of your income to pay for college, then the amount of money you owe in taxes may be reduced.
As a helpful tip, you can use the IRS Interactive Tax Assistant Tool to check if you’re eligible for credits and deductions. It’s a 25-minute process that’s pretty similar to those college tuition calculators you may have used back in high school.
3. Understand your W-2
It’s the Holy Grail of tax forms.
Did you know W-2 stands for Employee Wage Report form? The W-2 form is issued from employer to employee by January 31, and tells the IRS how much you earned and how much was already deducted for taxes, Social Security or Medicare. If you’ve never seen a W-2 before, familiarize yourself by checking out this sample W-2. A copy of your W-2 must always be included when you file your tax forms, whether you are sending in your forms online (in tax jargon: e-filing) or physically mailing your tax forms. Always double-check whether your Social Security Number (SSN) and the company’s corresponding information is correct.
4. Know which 1040 tax form to file
All this jargon is crazy, but you do need to know it.
Okay, getting into the actual tax form. All individual federal taxes should be filed on a 1040 form, but there are different types of the 1040 form: 1040A, 1040EZ and the 1040. Most college students file the 1040A form because it allows you to include information regarding income from taxable scholarships and fellowship grants, along with income from a job. You can also include deductions from paying interest on student loans and from paying tuition and college-related fees.
Similarly, the 1040EZ form is for people who have a taxable income below $100,000. Fill out this form if you are single or married but do not have any dependents (i.e. a child who you are financially supporting) and your interest income (the amount of money you receive as interest per year) is under $500.
But if your income is higher than $100,000, if you rank as self-employed or rank as a partner in a company, or you have certain shareholder status (you own a number of stocks), you will need to file the 1040 form and therefore qualify for a higher tax rate.
You will have to use your best judgment to decide which tax form to file, but the best part is that if you use a tax software and e-file, the software will have you fill out your information and automatically choose your form for you! This way you will receive the form that will help you get the most benefits. This leads us to our final point.
5. There are benefits to e-filing
It’s time to do some shopping…for tax software! But actually, we guarantee it’ll make your life a lot easier during tax season. Not only does e-filing eliminate human error, but receiving refunds usually takes half the time compared to the 21-day window you would incur if you were mailing your tax form. If your adjusted gross income (AGI) is below $62,000, then luckily you can file directly via IRS Free File.
Colby College alumna Kayla Lewcowicz recommends, “Use TurboTax! It will save your life. And don’t be afraid to call your parents on this one — it’s too important to mess up.” TurboTax is Intuit’s chief tax software, and it has a reputation of being easy to use with step-by-step instructions along the way. Therefore, it is perfect for first-timers. While you’re filing, TurboTax also shows you in real time how many refunds you qualify for, and you have live access to chatting with a tax expert for any questions. And the bonus is, it has a Federal Free Edition which is, yup, absolutely no-cost. The Free Edition should suffice for anyone who is filing a simple 1040A, 1040 or 1040EZ form. Anything more complicated and you will need to upgrade to their paid version.
Other popular tax software programs include H&R Block Free Edition, TaxAct Free Federal Edition and TaxSlayer Free Federal Edition. Since you can probably make do with a basic tax program at this stage in your life, it’s best to try out some of the free, bottom-tier offerings that accounting companies produce. It also helps to ask your parents, who have had years of experience at this, what software they’ve been using.
Breathe; you’ve just gone through a lot of information. As Kayla says, “Forget graduation, doing my taxes was a much bigger wake-up call!”
While filing taxes may sound tedious, it’s just another part of adulthood, and you may be surprised to find out how much it pays off (literally). So do your research, get advice from your family and friends, check-in with an expert if you can, and definitely do not procrastinate when it comes to filing your tax return!