Tax know-how eases filing pain for students

Tax know-how eases filing pain for students

By Bridget Pride

Only about a week remains to file tax returns before this year’s
deadline of April 17.

For many in college this is a time of confusion, as questions
concerning financial aid, work study and dependency arise. Students
should be aware of the special circumstances that may affect their
filing.

The most simple situation is that of a filer who is a regular
employee with no other income. Such people need only the
information provided on their W-2 forms, sent by employers, to fill
out their tax forms.

However, according to Paul Cheesman, office supervisor of the
H&R Block on Westwood Boulevard, filing becomes more complex
once a person has their own business, receives interest or dividend
income, owns rental property or other more complicating
situations.

Although such circumstances rarely affect students, receiving
scholarship money is another form of outside income that often
does.

For full-time students, the total cost of support is determined
by the amount of tuition, books and supplies, as well as living
expenses. If scholarship money exceeds that needed for school, it
must be reported as income. Work study awards are reportable as
well.

But not everyone must file, Cheesman said. Independent singles
under the age of 65 who earned less than $6,050 do not need to
submit a return.

However, many students are supported to some degree by their
parents, who themselves receive specific deductions to lower their
own tax liability. Once claimed as a dependent on another’s return,
the person may only earn up to $600 before he or she must file a
return.

How parents claim students on their returns naturally affects
the financial aid award amount. Although the law says that parents
who provide more than half of the support for their 19 to 24-
year-old children must claim them, there are some who do not, with
the specific intention of making the student appear more eligible
for financial aid.

"The IRS sometimes doesn’t catch this," says Cheesman of the
scam.

Tax preparation services offer support to those unfamiliar or
confused with the filing process. Because the typical American will
spend an average of 12 hours preparing the forms, seeking
professional assistance is worthwhile for many, especially
students.

When taking advantage of the services of an income tax preparer,
filers should make sure to bring W-2 forms, any financial aid
information such as a Financial Aid Notification letter and
supporting parents’ income tax information.

One of the most valuable services that tax preparation services
offer is electronic filing. Although the IRS has yet to go on-line
(with the exception of certain test markets), it has been
encouraging a growing number of filers to utilize electronic filing
services.

It is still not possible to submit a return directly to the IRS
by modem, but intermediaries such as tax preparers and even some
employers can provide such access. These intermediaries will take
prepared tax forms and submit them hundreds at a time to IRS
offices.

There are some drawbacks to filing electronically, namely the
increased possibility of an audit. Due to the high instance of
fraud that occurred with electronically filed returns last year,
the IRS has imposed stricter standards on electronic filers,
auditing up to 25 percent of such filers.

Also, contrary to some beliefs, it is not an entirely paper-free
method of filing, as W-2 and signature forms must still be
submitted. There is also the additional cost. Most tax preparation
firms charge an additional fee, around $30, to file by
computer.

On the other hand, because returns go directly to the IRS,
processing of returns starts immediately. The traditional method of
mailing returns must clear state offices in Fresno before going on
to federal headquarters, which in itself can take up to two
weeks.

Cheesman claims that "it is much more advantageous for people to
file electronically."

Many students, however, do not find the need to seek
professional assistance. Matt Chiayaporn, a third-year math and
computer science student, claims that he was able to fill out his
1040E-Z income tax form in about 30 minutes.

"I filed as soon as I got my W-2 form," Chiayaporn said. He
added that he would only consider seeking help from a professional
if he had to file a more-detailed form, such as a regular1040
form.

Students applying for financial aid this year should note that
an added advantage to filing their taxes early is that it speeds up
the aid processing period. The Financial Aid Office recommends that
students have tax information prepared when they file their
financial aid applications, which were due on March 2.

There are other alternatives to paying for professional
preparers. Many students often seek the assistance of friends.

Kiet Huynh, a second-year law student, said that even though he
didn’t have to file this year because he didn’t work, he assisted a
friend in filing.

Having taken a law school course in federal income tax, he was
able to prepare his friend’s taxes in less than 40 minutes.

"My friend didn’t even make enough money to take advantage of
all the skills I had learned," he complained.

There is also an organization that offers tax preparation
services right here at UCLA. VITA, or Volunteer Income Tax
Assistance, is a national volunteer program aimed at helping
lower-income bracket and disadvantaged filers prepare their
taxes.

Although the several chapters of the organization in Los Angeles
target largely the elderly and non-residents, the UCLA chapter’s
most frequent customers are naturally students.

For two weeks at the beginning of tax time, volunteers operate
the service on a daily basis in Ackerman Student Union. The program
is provided totally free of charge to those whose reported income
is less than $50,000. Furthermore, filers receive qualified
assistance, as volunteers must complete 24 hours of minimum
training and pass a comprehensive examination. They are then
certified by the IRS and the Franchise Tax Board (FTB).

Last year, with about 80 to 85 volunteers, VITA assisted about
250 people, and had the capacity to assist many more.

To take advantage of their services, come in during the
following days in April from noon to 5 p.m.: April 3 to 7, and
April 11 to 14 in Ackerman 3508; and April 15 and 17 in Ackerman
2412.