Students filing 2004 tax returns might find the process intimidating—from online filing to figuring out refunds and exemptions, many students have more questions than answers as the April 15 deadline looms.
When college students receive their paychecks, federal and state taxes are already subtracted. But many of those students do not make enough annually to owe the government money—or they might qualify for deductions that entitle them to more of their income than they took home.
The Internal Revenue Service estimates that this year nine out of ten students will file tax returns. Some students, daunted by the seemingly complicated process of filing taxes, lose potential refunds because they do not understand their options.
“There are a bundle of factors that play into how students should approach filing tax returns—no standard package exists,” said Sandy Potter, a tax consultant for Liberty Tax Services.
Potter said students should take an active role in evaluating their circumstances, rather than relying completely on parents. To avoid problems like not receiving the necessary forms, she said, they should file as early as possible.
Junior Bonnie Brooks has followed the steps Potter prescribes and has used the 1040EZ e-filing online system all three of her years at Duke. “It’s simple, it took an hour at most in one sitting,” Brooks said. Brooks opted to not file state tax returns because the price of doing so outweighed her potential state refund.
The popular e-filing program 1040EZ—one of a multiplying number of online filing systems—charges $19.95 for federal returns and an additional $9.95 for state returns. Many less popular online systems, such as Free File or TaxACT, charge little to nothing.
Before filing online, however, students must receive W-2 or 1040 tax forms, which employers are required to send by the end of January. But many students, including junior Adebola Falae, have struggled obtaining their tax forms.
“I’ve been having document trouble this year. First, my job didn’t mail the returns to my mom on time, and now that she finally got them, I’m trying to get them here,” Falae said.
Like most undergraduates, Falae is claimed as a dependent by her mother—granting her mother a $3,100 exemption from income taxes.
In addition to the exemption their parents receive, students who are dependents are allowed to earn up to $4,850 of personal tax-liable income without owing taxes on it. All full-time students under 24 years old who do not qualify as dependents can still enlist for Earned Income Tax Credit.
Earned Income Tax Credit is a $36 billion federal tax refund system initiated to alleviate the tax burden of low-income workers and encourage them to work. The program is a major source of tax relief for graduate students.
The Student Loan Interest Deduction, another program that offers relief to students, offers tax deductions for some students up to the amount of interest they pay on their student loans.
Potter said the loan deduction often applies to students even after they graduate from college, as long as they are still paying interest on their loans.
Despite the wide range of deductions and exemptions that are available, students cannot take advantage of any of them while filing their taxes if they are not aware of their choices.
“There are so many circumstances to consider,” Potter said. “But a quick tour of IRS.gov can really teach students a lot.”
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