The Tax Man Comes to UCI: Tax Advice for Students
Taxes, and all the hours associated with them thumbing through paperwork and checking calculations, does not constitute as fun. While nothing will make the process something to look forward to, it can at least be made much less complicated while still monetarily beneficial with key pieces of information from the pros.
According to M. Scott Gallagher, who owns Button Tax Preparation, many students qualify as dependents although students, often paying for their own education, think otherwise.
Dependency as a legal term is more elastic than one might think. Gallagher recommends that students talk to their parents about whether or not they will be claimed as dependents. If not, students should file as a single 0 or 1 on their W-4, to get a bit of their money back from the government.
“Most students don’t know that their parents get the discount [for having a dependent], not the student,” Gallagher said. As a result, students often owe more than they should.
Another common hurdle in the tax process: the technical jargon.
“Don’t presume you know what a term means,” Gallagher said.
José Rodriguez, a first-year criminology major, encountered that language difficulty in such common words as equity.
“When I think of equity, I think of the value of a home. But the form will say underneath the word: ‘equity here does not relate to home value, ’” Rodriguez said.
The legal definitions of words can be very strict. Income and wages, for example, have very different connotations on tax forms, despite their interchangeability in everyday language.
“It happened pretty often that I didn’t know a term,” Timothy Macagba, a second-year biomedical engineering major said. Macagba has done his parents’ taxes twice.
When stuck on a word, Macagba turned to the IRS Web site. From there, searching “terms” will lead to tax-specific glossary.
Vocabulary isn’t the only thing giving student taxpayers headaches. Miscalculations are all too common and can come at a hefty sum.
“My friend accidentally tacked on a zero [to her income]. She had to pay [the IRS] back what she owed as well as a 10 percent fine,” Rodriguez said.
For those who are not human calculators, electronic filing is the way to go. Online forms can help prevent common errors by automatically computing for the user.
“Filing on paper is a lot harder,” Macagba said of the hours he spent double-checking his work when doing his taxes manually.
For those making $57,000 or less filing with online software is free. Mediated through such well-known programs like TurboTax and H&R Block, the IRS provides this service on their Web site. Getting state taxes done without charge will mean filling out everything again, however. Since there are probably better things to do on a Saturday than taxes, it perhaps will be worth the money to pay for state taxes to be done at the same time as federal taxes.
Rodriguez found paying a tax preparer to check his work worth the expense, after learning of his friend’s situation. Having someone else do the work can get pricey, however.
Record-keeping helps any taxpayer enormously. Students don’t make enough to be qualified for write-offs based on charitable donations and the like, but keeping recent check stubs to compare with W-2s is always a good idea. The more organized, the less hassle.
And don’t be misled into thinking tax consultations can mean major savings.
“Tax firms advertise how they can get you the most deductions possible, but most students don’t qualify for [those deductions],” Gallagher said.
Talking to parents about dependency, knowing the jargon, e-filing, and keeping track of records can eliminate some, but not all of the hassle.
“It’s tedious, and at first, nerve-wracking,” Macagba said. He advises other students to do their taxes early (before the Apr. 15 due-date!) and double-check their work.
When all else fails, get help by calling the IRS helpline at 1-800-829-1040.