Though filing taxes can be a daunting task, the IRS and FAFSA have tried to simplify the process for students. Director for Student Financial Services Ava Brock offers an explanation of several aspects concerning taxes that are especially beneficial for students to know.
“The IRS and the FAFSA, which are both federal government agencies, are working together to create more accurate FAFSA information so that there’s not too much need for verification,” Brock said.
In order to minimize the possibility of being asked for verification, students can now upload their tax information directly to the FAFSA, as long as they have already filed their taxes with the IRS.
According to Brock, after a student has filed the FAFSA and it has gone through the University’s channels, the federal government may request that it be verified, which requires the University to verify the student’s tax information by looking at his or her tax return.
“The thing about anything tax-related is that it is so different for each person. I really recommend that students talk with their families about anything about taxes because, one, it is very likely that their parents claim them as a dependent, so how the parent is reporting is directly related to how the student reports. Secondly, every person’s situation is so different it is important that you get good tax advice from a tax professional if it’s complicated at all, because none of us on campus are trained tax professionals,” Brock said. What Brock can do, she says, is guide students to the forms they need to fill out.
Brock explained that there are several different tax credits available for students and their families for educational expenses: the American Opportunity Credit, the Hope Credit and the Lifetime Credit. The American Opportunity Credit allows students to include tuition, fees and supplies as educational expenses. The supplies amount is not included in the 1098-T form. The Hope and the Lifetime credit only include tuition and fees, but not supplies.
However, noted on Form 8863 is that an individual cannot take both an education credit and a tuition and fees deduction (Form 8917) for the same student in the same year.
Also, Form 8863 also states that the American Opportunity credit cannot be taken for the same student for more than four tax years, and the Lifetime learning credit and the American Opportunity credit cannot both be taken for the same student in the same year. Instructions and additional information, including eligibility, restrictions and details, can be found on “Instructions for Form 8863,” available on the IRS website.
Brock said that because of the cost of Puget Sound’s tuition, many of students are eligible.
She also mentioned that the American Opportunity Credit could also be a refund, meaning that if a student or their family does not owe the government any money then they could actually get money back with this credit.
According to Brock, a large percentage of the University’s students are dependents of their parents, so “the parents are the ones that really want to utilize this credit because it’s going to serve them, where the student with lower income isn’t generally going to be needing the credit.”
“My parents file taxes and fill out my FAFSA, but I don’t do it myself. I don’t file taxes because I don’t make enough money to necessitate it,” sophomore Kelli Conley said.
As written on the “Filing Requirements” form on the IRS website, parents can choose to include their children on their tax return if their children are under the age of 19 or are full-time students under the age of 24 at the end of 2010. The “Filing Requirements” document gives more information and also provides charts to see if you are required to file a return.
For example, Chart A states that “IF your filing status is Single AND at the end of 2010 you were under 65 THEN file a return if your gross income was at least $9,350.” There are different requirements and qualifications if you are a dependent or other special situations.
Brock explained that the University uses a third-party servicer, ECSI, to provide the forms for students because the servicer can supply them online and available for access 24/7.
However, to deliver something electronically, the student’s permission is required. Therefore, Student Financial Services sent out an email in November to urge students to sign up to receive their 1098-T form electronically.
According to the email sent by Student Financial Services, students who signed up for electronic access can retrieve their 1098-T form online at www.ecsi.net/1098T.
The 1098-T form is a summary of tuition charges as well as grants or scholarships that students or their parents used during the calendar year, which could qualify them for annual educational tax credits. Students who did not sign up for electronic access will receive their 1098-T form in the mail
“It’s also a sustainability issue, so we try to distribute everything electronically. Only about a third of our students signed up for that service for electronic notification,” Brock said.
“It’s [filing taxes] is a life skill that should be incorporated into our all-encompassing education,” sophomore Taylor Cassell said when asked how she felt about the somewhat unfamiliar task.
“Read the fine print carefully,” Brock said as her last word of advice.
