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Paying Your Taxes is No Joke!

April 1, 2013

delToday’s guest post comes from Del Bharath, Chapter President for Nebraska AmeriCorps AlumsDel served as an AmeriCorps VISTA in Lincoln, NE from 2009-2011. She moved to Omaha, NE to serve as a VISTA Leader with the Re-engage Omaha Program until 2012. Currently, she is pursuing her MPA at University of Nebraska – Omaha.

Tax preparation can be a daunting task. These are the answers to some frequently asked questions that may help you as you navigate the tax world. AmeriCorps Alums has a free tax preparation resource through One Economy for registered members who made under $57,000 in 2012. If you have more in depth inquiries, the IRS sponsors the Volunteer Income Tax Assistance (VITA) program that prepares state and federal tax returns for free and preparers would be able to answer your questions.

Here are some frequently asked questions around filing your federal and state taxes and paying taxes on your Education Award:

  • Do I have to file federal taxes?

If you are a single person under the age of 65 that makes under $9,500 then you do not have to file federal taxes. If you are married filing jointly are your combined income is under $19,000 then you do not need to file a federal return. However, you may want file a federal return if you have any federal taxes withheld so you may receive a refund for that amount or to see if you qualify for any credits.

If you are claimed as a dependent on someone else’s return you can still file a return to be refunded the federal taxes that you have had withheld.

For any other filing status the IRS.gov has a great step by step resource to determine if you need to file here or see table below.

Filing Status

Age

Minimum Income Requirement

Single Under 65

$9,750

65 or older

$11,200

Head of Household Under 65

$12,500

65 or older

$13,950

Married Filing Jointly Under 65 (both spouses)

$19,500

65 or older (one spouse)

$20,650

65 or older (both spouses)

$21,800

Married Filing Separately Any age

$3,800

Qualifying Widow(er) with Dependent Children Under 65

$15,700

65 or older

$16,850

http://www.efile.com/tax/do-i-need-to-file-a-tax-return/

  • Do I have to file state taxes if I moved from another state to serve in AmeriCorps? Or moved to a different state after I served in AmeriCorps?

If the state that you live(d) has an income tax* you must/should file a return every year that you have income. If you have income in one state and moved to another state where you have income, you have to file partial year resident tax returns in both states.

If you live in one state and have income in another, you may have to file a non-resident return for the state you work in and a resident return for the state you live in. For example, there are many people that live in Omaha, Nebraska but work in Iowa. These people have to file a non-resident Nebraska state return and a resident Iowa state return. Be certain to file the form offering credit for taxes paid in another state where eligible.

Each state has special requirements on filing returns so be sure to check with you state before deciding whether to file or not.

*Seven states have no state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two others, New Hampshire and Tennessee, tax only dividend and interest income.

  • Can my parents still claim me as a dependent?

tax-dayYour parents can still claim you as a dependent if you are under 24, a full-time student, still live(d) at home or in a college dormitory for more than half the year, and you provide(d) less than half the cost of your care for the year.

For example, in situations where a new college graduate that is under 24 and lives in their parents’ home while they start their AmeriCorps service can still be claimed as a dependent by their parents.

However, the next year the member cannot be claimed as a dependent as their income would be more than half the cost of the care, even if the member lives at home.

For any other questions about who can claim you as a dependent or if you can claim anyone as a dependent see the IRS.gov site for Dependency Information or http://blog.turbotax.intuit.com/2011/12/16/10-odd-dependent-questions/

  • What are Education Credits?

The U.S. government provides incentives, in the form of education tax credits and deductions, to help decrease the economic impact of pursuing a college education.  If you paid eligible education expenses for you, your spouse, or your dependent, you may qualify for one of these tax benefits.

There are 4 main Education Credits provided by the IRS: American Opportunity Credit, Lifetime Learning Credit, Benefits for 529 College Savings plans, and Tuition and Fees Deductions.

Please note, if you are claimed as a dependent you cannot claim these credits. Also, if you claimed the Hope Credit (now no longer available) in past years, your eligibility for the American Opportunity Credit may be affected.

For more information on Education Credits click here or go to http://www.irs.gov/publications/p970/ch02.html

  • What is student loan interest and what do I need to do with this information?

If you pay student loan interest or if AmeriCorps pays your student loan interest during service, you will receive a 1098-E. This information is needed and will affect the amount of your taxable income.

For more information on Student Loan Interest click here.

  • Is my Education Award a Scholarship?

No. Your education award is not a scholarship. Since your education award is taxable, if it is used as a scholarship, you can be taxed improperly. If your institution reports it as scholarship, talk to the institution’s financial aid office to have the status changed.

  • What does it mean when the Ed Award and interest paid by AmeriCorps are considered taxable income?

If the National Trust pays any student loan interest on your behalf during your service year it is considered taxable income. This amount can either be added to your W-2 or you may receive a 1099-MISC. Any amount of your Education Award that you use during the tax year will also increase your income for that year. You will receive a 1099-MISC for this amount. Be aware that this may bump you into a higher tax bracket and affect the amount you will owe or receive back.

AmeriCorp Alums has a great article on “Minimizing Tax Burden on The Segal AmeriCorps Education Award” that explains how using the Ed Award can affect you tax bracket.

  • What is Earned Income Tax Credit (EITC) and do I qualify for this credit?

Earned Income Tax Credit (EITC) is a refundable federal income tax credit for low to moderate income working individuals and families.

If you make less than the following amounts (based on your individual situation) you may qualify for the EITC/

  • $45,060 ($50,270 married filing jointly) with three or more qualifying children
  • $41,952 ($47,162 married filing jointly) with two qualifying children
  • $36,920 ($42,130 married filing jointly) with one qualifying child
  • $13,980 ($19,190 married filing jointly) with no qualifying children

For more detailed information on EITC criteria please click here.

  • Do I have to list last year’s state tax refund as income this year?

No. If you filed a 1040 or 1040EZ you do not claim this amount as this is a refund owed to you by the IRS.

If you itemize your deductions last year (instead of claiming the standard deduction) and included your state or local income taxes as a deduction, the refund you earn as a result might actually be considered income for the year you receive it. In this case you would receive a 1099-G but that does not mean that you pay additional taxes.

  • I recently found out that I did not include some of my income on my tax return. What should I do?

You must file an amended tax return (IRS Form 1040X) which must be filed within three years after the date you filed your original tax return, or two years after the date you paid your taxes for that year, whichever is later.

For information on filing your 1040X click here.

Have more questions around filing your 2012 taxes and your AmeriCorps Education Award? Share with us in our current LinkedIn discussion.

If you made under $57,000 in 2012, AmeriCorps Alums has a free tax preparation resource through One Economy for registered members

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