There’s a great way for students to get a bunch of cash after blowing a big pile of money during spring break: file your income taxes.
It sounds counterintuitive, but for many people of modest income (and that includes most of us students) tax time is a golden opportunity to get money back from the government to be used on (for example) frosty beverages, rather than paying money to the government to be used on (for example) war in a very thirsty environment.
This year it is especially important to file taxes because the government has an economic stimulus package which basically involves giving free money to taxpayers with more than $3,000 worth of qualifying income. How much money? Between $300-$600 if you are single, and $600-$1200 if you are married.
This package of free fiscal goodies may not come around again until another Republican president runs our great nation’s economy into hard-packed desert dirt like a drunk behind the controls of a fighter jet, so get in line.
Even if you need to pay a tax professional to do your taxes – and I certainly count myself in that group – money paid in versus money paid out can produce a net gain well worth your time and effort.
Like I have done every year since I was 19 years old, and supporting myself through college, I gathered up my messy paperwork and headed for the friendly green logo of H&R Block, clutching my W2s and receipts but, thankfully, no 1099s this year, ha ha.
(OK, if you were into doing your taxes that would be mildly funny, trust me.)
In theory, I could do my own taxes. I could yank my own wisdom teeth, too. Spare me the pain, I say.
This year my taxes were done by Michelle Watson, a pleasant and chatty office manager who dashes back and forth between the H&R Block located at 2617 University Ave. SE and the HarMar Mall in Roseville, built when dinosaurs roamed the earth and hung out with hippies.
After computing my pay from the four different jobs I had in 2007, Michelle calculated I owed $61 in taxes, not counting the stimulus money I’d receive within a few months. This was a fairly decent and profitable result, but Michelle thought she could do much better. She asked about the fees I had paid the University other than money paid toward tuition.
“Just look up your account on One Stop,” she told me, quite familiar with our University system.
Using Michelle’s computer, I went to my student account. I had to bite my tongue to keep expletives from coming out due to all the fees I had paid.
Graduate and Professional Student Assembly, $12.47. HIPA Technology Fee, $250. Student Services Fee, $324. Transportation Fee, $16. And last but not least, the mysterious “University Fee” at $300. All that can be just about doubled, because that’s per semester.
Adding these deductions took me from $61 in the red to $240 in the black. I’ll buy my kid some video games.
Of course, the State of Minnesota tax return took a big bite out of me, to the tune of $184, but Michelle asked me about rent I had paid and whether I had received a Certificate of Rental Payments. Calculating my rent against my income, Michelle figured I was owed $74 by the State of Minnesota as soon as I could get a CRP from my landlord.
My landlord was surprisingly pleasant about coughing up the paperwork. In the last few days, I’ve been trying to determine if it would be possible to obtain CRPs for 2005 and 2006, which might actually produce a net gain if I could file amended Minnesota State tax returns.
In the meantime, I want to pass on my hard-earned experience: for heaven’s sake, get a CRP from your bloodsucking landlord.
Like her fellow H&R Block employee David, who helped me last year, Michelle made the tax process painless and almost fun.
Of course, not every student should do their own taxes. In many cases, you might be better off letting your parents claim you as a dependent. But you should actually scrutinize your situation instead of thinking, “Arg, taxes are very much like homework.”
The government is depending on you to halt the recession, so file your own independent tax return if you can. Get the free money from the economic stimulus package. And buy beer to help America.
To understand the distinctions between when a student should file versus letting the parental units take care of it, I asked Michelle to explain it to me in an e-mail so I could pass it on to readers. Here is Michelle’s explanation, condensed:
If a student is in school and under age 24 and their only means of support is student loans or scholarships, generally they may be claimed on their parents’ tax return as a dependent. If they are not paying half of their own support they cannot claim themselves on their return. They are a dependent of their parents even if the parents agree to let them file their own tax return.
However, if a student is providing more than half their own support (for example, their student loans are all in their name, and they pay their living expenses by working a job) then even if they are under 24 they could be considered independent. The proof is if they can show they are supporting themselves and not the school, government or their parents. That’s why if all their support comes from loans or scholarships they are still their parents’ dependent.
Generally, if students have wages less than $5350 (the current standard deduction) I would recommend they allow their parents to take them as a dependent, to negate some of the parents’ tax liability. A student under the threshold would not have any tax liability and is not eligible for Earned Income Credit since they are not 25 or older.
But for independent students, the Economic Stimulus Package will generally mean an extra $300 in their pocket if they file their tax return as long as they have at least $3,000 in wages.
(Don’t you just love tax time?)
John Hoff welcomes comments at [email protected].
