Tax Seminar for Students February 8, 2001

1. Tax Seminar for StudentsFebruary 8, 2001 By Aaron Metcalf, MSI

2. DISCLAIMER • I am NOT a professional tax preparer. • This is only an information session. • If you have any questions on your tax return, please consult the IRS or your tax preparer. • Thanks!

3. Taxes are due April 16, 2001

4. Definitions • Tax Deduction - this is an amount you can deduct from your totalled income to give you your adjusted gross income (AGI). You use your AGI to figure your tax in the tax table. • Tax Credit - After you have figured your tax, you may be able to subtract certain amounts from it. These amounts are called tax credits.

5. Before you begin: • Make sure you have your W-2 form from each job you have worked at in the past year. • Make sure you have your 1099 form if you have received any interest from a bank or savings account. • Your form from UNTHSC showing how much you have paid in tuition and fees last year (Form 1098-T).

6. Dependent on mom and dad? • - not any more! • In most of our cases, you will be claiming yourself as a dependent. Make sure that your parents are not planning on claiming you. If they do, this may EXCLUDE you from some of the deductions and credits discussed here. Example: You CANNOT claim the student loan interest deduction if you are someone else’s dependent.

7. Which 1040 Form should you use? • 1040EZ • 1040A • 1040

8. You may file Form 1040EZ if: • Single or married filing jointly w/ no dependents • Taxpayer (and spouse) under age 65 and not blind • Taxable income is <$50,000 • Taxable interest income <$400 • NOT reporting dividends, capital gains distributions, IRA distributions, annuity income, or social security benefits • Taxpayer did NOT receive any advance earned income credit payments (EIC) • NO itemized deductions, adjustments to income, or credits (other than EIC).

9. You may file Form 1040A if: • Taxable income is <$50,000 • NO itemized deductions • Only adjustments to income are deductions for IRA contributions and student loan interest deduction. • Only credits claimed are child and dependent care credit, credit for the elderly or disabled, adoption credit, child tax credit, education credits, and EIC.

10. You may file Form 1040 if: • Taxable income is $50,000 or more • Itemized deductions • Income that cannot be reported on Form 1040EZ or 1040A (such as gain from the sale of property, self-employment) • Has an interest in a foreign bank account or trust • Received nontaxable distributions

11. Tax Deductions • Standard deduction • Itemized deductions • Student loan interest

12. Standard deduction • Single = $4,400 • Married, filing jointly = $7,350 • Married, filing separately = $3,675 • Head of Household = $6,450

13. Itemized deduction • You may want to itemize if you: • have high medical bills • pay a lot of mortgage interest • pay a lot of state and local income taxes (note: Texas does NOT have a state income tax, but you may have paid other state income tax prior to moving to Texas this year.) • contribute large amounts to charity • If these expenses add up to more than the amount of the standard deduction, the law allows you to claim this higher total.

14. Common deductions that you might take if you choose to itemize: • Real estate / property tax • Interest paid on your home’s mortgage • Charitable contributions (church, etc) • Income tax from another state • Thrift value of donated items (Goodwill, etc) • Miscellaneous deductions of more than 2% of your AGI • These include the cost of the previous year’s tax preparation, certain legal fees, and some other deductions.

15. Mortgage Interest • In MOST cases, you will be able to deduct ALL of your home mortgage interest. • Please consult IRS Publication 530 for more details about the mortgage interest deduction, as well as the deduction of certain points and certain real estate taxes.

16. Deductible Student Loan Interest • What is deductible? • Interest you paid on your qualified student loan in 2000. • You can only deduct interest paid during the first 60 months that interest payments are required on the loan. • Paid interest on a loan taken out only to pay qualified higher education expenses, such as 1) tuition & fees, 2) room & board, 3) books, supplies, & equipment, 4) other necessary expenses (transportation)

17. Deductible Student Loan Interest • Income Restrictions • Single - under $40,000; with phase out from $40,000-$55,000. • Married, Filing Jointly - under $60,000; with phase out from $60,000-$75,000. • CANNOT claim if: • 1) Married, filing separately • 2) Listed as a dependent on someone else’s return

18. Deductible Student Loan Interest • Do NOT need to itemize to claim this deduction. • Maximum deduction • Student loan interest deduction cannot exceed $2000 • Consult Publication 970, Tax Benefits for Higher Education for more information or specifics not listed here.

19. Deductible Student Loan Interest • If you pay more than $600 in interest during the year to a single lender, you should receive a statement at the end of the year from the lender showing the amount of interest you paid.

20. Tax Credits • Lifetime Learning Credit • Earned Income Credit (EIC) • Child Tax Credit • Child and Dependent Care Credit

21. Lifetime Learning Credit • You can receive a 20% tax credit for the first $5,000 of tuition and fees paid out-of-pocket. • Maximum credit is $1,000, per return, NOT per student. • You will need to fill out Form 8863 • You must get Form 1098-T from UNTHSC.

22. Who should you see about getting this 1098-T form? • Asha Pai, Senior Accountant in Student Receivables • Ph# (817)-735-2667 • Email: apai@hsc.unt.edu • You can have her send this form to your mailbox on campus

23. Lifetime Learning Credit • You CANNOT claim this if: • Married, filing separately • Listed as a dependent on another return • You or spouse were a nonresident alien for any part of 2000 • Certain education IRA withdrawals (please seek more information on specifics) • You can claim the Hope Credit for the same student

24. Lifetime Learning Credit • Adjustments to Qualified Expenses • If you pay higher education expenses with certain tax-free funds, you CANNOT claim a credit for those amounts. These include scholarships, Pell grants, employer-provided educational assistance, veterans’ educational assistance, or any other nontaxable payments received for educational expenses. • The following do NOT reduce the qualified expenses: earnings, loans, gifts, inheritance, or personal savings.

25. Lifetime Learning Credit • Income Requirements • You CANNOT claim the Lifetime Learning Credit if your modified adjusted gross income is: • Single: $50,000 or more (phase-out is between $40,000 and $50,000) • Married, filing jointly: $100,000 or more (phase-out is between $80,000 and $100,000)

26. Earned Income Credit (EIC) • Please refer to IRS publication 596 for more details. • Your filing status CANNOT be “Married, filing separately.” • You must be a U.S. citizen or resident alien all year. • You cannot file Form 2555 or Form 2555EZ. • Your investment income must be $2,400 or less. • You must have earned income.

27. EIC if you do NOT have a qualifying child • You must be at least age 25, but under age 65. • You CANNOT be the dependent of another person. • You cannot be a qualifying child of another person. • You must live in the U.S. more than half the year. • Your earned income must be less than $10,380. • Your modified AGI must be less than $10,380.

28. EIC if you have a qualifying child • Your child must meet the relationship, age, and residency tests. • Your qualifying child CANNOT be the qualifying child of another person with a higher modified AGI. • You cannot be a qualifying child of another person.

29. EIC if you have a qualifying child - income #’s • If you have one qualifying child • Earned income must be less than $27,413 • Modified AGI must be less than $27,413 • If you have more than one qualifying child • Earned income must be less than $31,152 • Modified AGI must be less than $31,152

30. Child Tax Credit • You may be able to claim a child tax credit if you have a qualifying child. The credit can be as much as $500 for each qualifying child.

31. Child Tax Credit • A qualifying child is a child who: • Is claimed as your dependent, • Was under age 17 at the end of 2000, • Is your son, daughter, adopted child, descendant of a child, stepchild, or foster child, and • Is an U.S. citizen or resident.

32. Child Tax Credit • Income limitation and phase-out begin if: • your tax liability is less than the credit, OR • your modified AGI is above the amount shown below • Single or head of household: $75,000 • Married, filing jointly: $110,000 • Married, filing separately: $55,000

33. Child Tax Credit • For more information and details, please see IRS Publication 17. • This is over 200 pages long, so access this at school if possible.

34. Child and Dependent Care Credit • If you paid someone to care for a qualifying individual so you (and your spouse if you are married) could work or look for work, you may be able to claim the credit for child and dependent care expenses. If you are married, both you and your spouse must have earned income, unless one spouse was either a full-time student or was physically or mentally incapable of self-care.

35. Child and Dependent Care Credit • The credit is a percentage, based on your adjusted gross income, of the amount of work-related child and dependent care expenses you paid to a care provider. You may use up to $2,400 of the expenses paid in a year for one qualifying individual, or $4,800 for two or more qualifying individuals. • Please see IRS Publication 503 for more details.

36. What records should I keep? • Copy C of all W-2 forms • Forms 1099 showing interest income • Copies of any other material sent with your return • Keep these records for at least 3 years from the date of the return.

37. Helpful Hints • File early • File electronically • you get your refund in 2-3 weeks; a paper return will take twice as long! • Efile is more accurate • Use direct deposit if you expect a refund

38. How to get tax help. • www.irs.gov • Call the IRS at 1-800-829-1040 • Call the Taxpayer Advocate at 1-877-777-4778

39. Some other web sites for help and information: • www.irs.com • www.taxplanet.com • www.hrblock.com

40. Where you can file online • www.quicken.com • you can file for free if your income is $25,000 or less • www.fidelity.com • www.hdvest.com • Fidelity and HDVest will allow you to file for free

41. Where you can file in person • HR Block • Wal-mart • Many, many others

42. Where you can file electronically for FREE in Tarrant County • RD Evans Recreation Center, 3242 Lackland Rd, FW; Tues 10a-2p and Sat noon-5p • Town Center Mall, FW; Sat noon-5p • Fellowship Baptist Church, 956 E Jefferson Ave, FW; Sat 10a-2p • Woodland West Branch, Arlington Public Library, 2837 W Park Row Dr, Arlington; Wed and Fri 1p-5p

43. Tax Software • TurboTax by Quicken, $19.95-$5 rebate (17.95 at Wal-mart) • TurboTax Deluxe by Quicken, $39.95 -$10 rebate • Kiplinger Taxcut, $9.99 • Kiplinger Taxcut Deluxe 2000, $19.99 • Sold at Best Buy, CompUSA, Circuit City, Office Depot, Office Max, Staples, Wal-mart, and other fine retailers.

44. DISCLAIMER • I am NOT a professional tax preparer. • This is only an information session. • If you have any questions on your tax return, please consult the IRS or your tax preparer. • Thanks!

45. The End