Date: 2010-03-02
JACKSON HEWITT® WEEKLY “TAX TIME TIP”:
FIVE REMINDERS FOR STUDENTS FILING TAXES FOR THE FIRST TIME
PARSIPPANY, N.J., March 2, 2010 – Each year, millions of students move into another phase of their lives – filing an annual tax return for the first time. Because many are still dependents on their parents’ tax return, they may be unsure of how to get started or even the kinds of questions they should ask. To assist those new to preparing an annual tax return, Jackson Hewitt Tax Service® devotes this week’s “Tax Time Tip” to considerations for students filing taxes for the first time.
This Week’s Tip: The most important place to start is confirming when, and if, you should file for the very first time. Many first-time filers incorrectly believe that if they are students, they are not taxed on the income they earn – and therefore don’t have to file a return. But if you have more than $950 in gross income and qualify as a dependent of another taxpayer such as a parent, you may have to file a tax return.
“Like a new academic subject or technical skill, understanding what goes into filing an annual tax return is something that students should take the time to learn, because it is a process they will go through each year during their lives,” said Mark Steber, chief tax officer, Jackson Hewitt Tax Service Inc. “Speaking with a tax preparer can help students new to filing learn about various tax rules, deductions and credits that may impact their tax return this year and in the years to come.”
Steber notes five considerations students filing for the first time should be aware of in regard to filing an income tax return:
Many people begin filing their own tax return when they get their first job as a teenager. In some cases, that individual is still a student and a dependent of a parent. Because they qualify as dependents on parental returns, these first-time taxpayers are not eligible to claim a personal exemption.
- No Income Tax Exemption for Students
The minimum filing requirement for a dependent taxpayer is based on income earned through wages or self-employment and through investment interest (for example, interest and dividends earned). There is no exemption from income tax for students, nor is there any special deduction or tax rate.
There are several credits available for students attending college, a university, or a trade school. If the student paid expenses that qualify for an education credit, they cannot claim the credit if they qualify as a dependent on another taxpayer’s return. If the student qualifies as a dependent on their parent’s return, only the parent can claim the corresponding deduction or credit. For example, Jaime is a 22-year old college student who is a dependent on her parent’s return. She is a full-time student in her fourth year of college. Jaime pays her tuition with proceeds from a student loan. Because she is a dependent, only her parents can claim the deduction or credit for her expenses.
- No Credits Claimed by Dependents
In addition to education credits, many other tax benefits such as the First-Time Homebuyer Credit, Earned Income Tax Credit, Child Tax Credit and the Making Work Pay Credit cannot be claimed if a filer qualifies as a dependent of another taxpayer.
Once an individual becomes an independent taxpayer (often by graduating from school), he or she can claim his or her own exemption and any credits if eligible. This can often result in an increased refund or a decreased balance due, as well as impact the tax return of the parent or other taxpayer who had been claiming the individual. By losing the dependent exemption, the parent will no longer be eligible for certain deductions and tax credits and will likely see a decrease in the tax refund amount or an increase in the amount owed.
First-time filers can find a series of brief, informative videos on key tax topics by going to www.jacksonhewitt.com. They can also find a list of Commonly Overlooked Credits and Deductions and What To Bring to their tax preparation appointment. For more information or to schedule an appointment, please visit www.jacksonhewitt.com or call 1-800-234-1040.
About Jackson Hewitt Tax Service Inc.
Jackson Hewitt Tax Service Inc. (NYSE: JTX), with more than 6,000 franchised and company-owned offices throughout the United States, is an industry leader providing full service individual federal and state income tax return preparation. Most offices are independently owned and operated. Jackson Hewitt is based in Parsippany, New Jersey. More information may be obtained at www.jacksonhewitt.com. To locate the Jackson Hewitt Tax Service® office nearest to you, call 1-800-234-1040.
Contact:
Melissa Connerton Stephanie King
CooperKatz & Company CooperKatz & Company
917-595-3039 917-595-3055
mconnerton@cooperkatz.com sking@cooperkatz.com