Tag Archives: IRS

It’s Tax Time Again

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It always makes me cringe a bit when I hear from students that they are “having their taxes done.”  It’s really not as intimidating as you might think to file on your own.   Here is what you need to know:

  • The Lifetime Learning Credit will allow you to reduce your tax liability if you had expenses for tuition and fees in 2021.  You will need to complete IRS form 8863 and Schedule 3 to claim this credit.
  • Student loan interest can be claimed as an adjustment to income, reducing your tax liability.  You will need to complete Schedule 1 to claim this credit. But, while you may have had interest on private student loans, you should not have paid any interest on federal student loans in 2021.  The interest rate on all federal student loans has been set at 0% since March 2020.
  • Student loan disbursements that you received DO NOT count as income.
  • Scholarships that do not exceed tuition and fees DO NOT count as taxable income.
  • If your income for 2021 is less than $73,000 you can e-file for free, with assistance from one of several well-respected tax software companies.
  • Free in person tax filing assistance is also available through Volunteer Income Tax Assistance.
  • If you need to locate your 1098-T from Penn State, it is available on LionPath.  Click on the “my finances” button, select “manage my account/make a payment.”  You’ll find “Tax Forms” near the bottom of the left menu.
  • If you are living in Pennsylvania, you will likely also need to file state and local income taxes.
  • Additional guidance for international students is available here.

And here are a couple of things that are special for the Covid times in which we live:

  • Economic impact payments you may have received, either directly from the federal government or in the form of a special Covid grant through the University, are not counted as taxable income.
  • A special income adjustment is allowed again this year for up to $300 for cash donations made to charity.  Normally this is a deduction reserved for those who itemize their deductions, but this year, to encourage this type of giving with so many organizations in need, it is deductible on top of the standard deduction.  It’s easy to find on line 12b of the 1040—and even easier if you use tax software.

Filing your income tax may feel a little intimidating.  Throughout my career I have learned that nobody comes to law school because they love math.  But filing taxes is definitely something that a law student should be able to handle on their own, without having to pay a professional (or persuade a parent).  The online/software programs available to help make it really easy.  And if you are getting a refund—that makes it all worthwhile.  And if you are NOT getting a refund, all the better.  That means that you have not been giving the federal government free use of your money all year!

There’s no need to fear.  Your “I Filed My Taxes” adulting badge is just around the corner!

Tax Time!

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Income Tax

I (and many others) got my W-2 form last week.  This means it’s time to start thinking about doing my taxes.  I like to do them early, because I want my refund to earn interest for me, rather than for the IRS.  But I, like many, hate the process.

I’m thankful that there is lots of help out there.  There are a couple of different options to get help with your taxes:  in person or in the form of computer software.  Many people just run in fear from the idea of taxes and assume their best option is to go to the local tax prep office and have somebody else do it.  This is going to be a pricey option.  If your tax picture is simple (e.g.: standard deduction and just wages and interest for income) there’s absolutely no reason to pay someone else to do this for you.  You can easily do it yourself.  If you have itemized deductions and capital gains, it’s a little more complicated, but you should still be able to handle it with the help of a computer program.  You can find a list of several good ones here.

Please remember that if your adjusted gross income for 2013 is less than $58,000 you are able to e-file and receive tax preparation assistance at no charge.

Also, keep in mind that you may be eligible for some educational tax benefits.  You should soon be receiving your Form 1098-T from the University (or you can find it on eLion under “Taxes—1098-T Credits” in the Financial section).  This will help you to calculate your eligibility for these benefits.

The Lifetime Learning Credit is a tax credit of up to $2,000 available to individuals who file a tax return and owe taxes.  This credit is subtracted from your tax liability, reducing the total amount of federal income tax you pay.  In order to claim this credit, you will need to complete and submit IRS form 8863 with your federal tax return.

If your income is too high to allow you to claim the Lifetime Learning Credit, you may qualify for the Tuition and Fees Tax Deduction of up to $4,000.  This is an “above the line” deduction, which means you do not need to itemize your deductions in order to claim it.  You can find this deduction on line 34 of your 1040 or line 19 of your 1040A.  The required supporting form is available online.

Additionally, student loan interest is an “above the line” tax deductible expense.  If you paid any student loan interest in 2013, you may be able to claim the Student Loan Interest Deduction.  You can find this deduction on line 34 of your 1040 or line 19 of your 1040A.

If you would like to learn more about tax benefits for education, you should reference the IRS publication on these benefits.