April 15 is a day most people dread: tax day. With federal income taxes due, some people will rush to finish all their paperwork while accountants convert desk space into bed space.
The daunting tax task doesn’t have to be so intimidating, though, tax professionals said.
With a few helpful hints, April 15 can be just another day.
File for an extension
Today is the last day people can file a Form 4868, which grants an extension on tax filings until Oct. 15.
Tax professionals encourage people to file for an extension even if they don’t have the money to pay right now, as filing is the only way to earn a federal income tax refund and avoid a penalty.
Those who claim themselves as dependant — which many students do — do not have to file federal income taxes if they made under $5,700, but failing to do so forfeits any potential income tax refund if they had taxes withheld.
Common mistakes and misconceptions
Many MSU students live on their own and away from their parents, but it doesn’t mean they should mark “independent.”
Students should check with their parents to see if they were claimed as dependant, as parents’ tax liability can be reduced by $3,650 per child by claiming them.
Peggy Pawelek Brown, H&R Block office coordinator, said many students think they are entitled to a federal income tax refund.
In reality, that is determined by withholdings for federal taxes and the individual’s tax liability, which varies depending on income.
Thomas P. Anton, a CPA and president of Integrated Financial Inc., 1504 E. Michigan Ave., said many people fail to report deductible materials such as license plate tags, legal and accounting fees, energy efficiency home credits and business expenses.
“Our advice is if you have any documents related to anything that you have done in the calendar year, then bring it in and let the tax professionals decipher what is deductible and what is not,” he said in an e-mail.
File online
There are several places to file taxes online, and 66 percent of taxpayers use e-file through IRS.gov to complete their taxes.
TurboTax.com also offers a free online tax filing service for low-income individuals, for which many students would qualify, said Michele LaForest Halloran, MSU professor of accounting and director of the MSU College of Law Tax Clinic.
Halloran said the Michigan Department of Treasury’s Web site, michigan.gov/treasury, and IRS.gov — specifically Publication 17 — provide explanations students would understand.
Education credits and deductibles
There are several ways to attain credits and deductions for higher education and qualifications. Terms for each credit are explained in Publication 970 at IRS.gov.
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Scholarships for qualified expenses — such as tuition and books — are tax exempt, and people also might have a student loan interest deduction.
A new education credit — the American Opportunity Credit — was created this year, and the Hope and Lifetime Learning credits remain intact. If students qualify, they must determine whether a student loan interest deduction or an education tax credit makes more financial sense, as they cannot choose both.
