The Basics of Filing for the First Time

Yellow post it note about filing tax return. Photo courtesy of Shutterstock.

For college students and recent grads, filing taxes for the first time can feel overwhelming. Not only are you responsible for supporting yourself financially, but now you must report your wages to Uncle Sam. By law, you are required to disclose any earnings to the Internal Revenue Service (IRS) and they then process the taxes you owe or are owed. But what if you’re a dependent? If this is the case then the rules differ slightly. Review the IRS regulations to determine the appropriate course of action. We’ve gathered some of the basics you’ll need to know if you’re filing for the first time.

Where Do I File?

In the event that you are attending a college or post-secondary school which differs from your “home” state then pay close attention. Generally, a federal return should be filed with the IRS in the state you consider your ‘permanent address.’ State income returns are different because not all states have a regulated income tax. The states excluded from state income tax are Alaska, Nevada, South Dakota, Texas, Washington, Florida, and Wyoming.

Claiming Credits

Nowadays many students receive subsidies or financial assistance from the government through credits and deductions. Both tax credits and deductions, in essence, reduce the amount of income tax you’re liable to pay taxes on, except deductions fluctuate based on the tax bracket you fall within. Assuming you’re not being claimed as a dependent, you may be eligible for one of the following credits:

• American Opportunity Credit: A large majority of students qualify for the American Opportunity Credit which can help pay for college expenses and other related costs. Although the credit is capped at $2,500 per student annually, most students who file for this credit are able to receive the full amount.
• Lifetime Learning Credit: If you qualify for the Lifetime Learning Credit you may be able to receive up to $2,000. The great part is that there’s no limit on the number of years you can claim this credit however the downside is that you cannot claim both the American Opportunity Credit and Lifetime Learning Credit in the same fiscal year.

The IRS’s Interactive Tax Assistant tool is an easy way to determine which educational credits/ deductions you qualify to receive. Otherwise, consult an IRS tax help professional to get a tailored financial analysis.

File Online

The IRS Free File system is available electronically to prep your taxes. The date to file currently stands at January 31st or postmarked by January 28th if you opt for the paper route.

About the Author

Lawrence Levy is the President and CEO of Levy & Associates, a firm specializing in IRS and state tax resolution. http://www.levytaxhelp.com offers traditional tax preparations as well as accounting and bookkeeping services.