The art of the taxes

Tax season: two simple words that mean different things to different people depending on the number at the bottom of the tax form.

The season starts in January and ends April 15. During these months, individuals contemplate filing their own taxes or working with an agency. The final decision can sometimes lead to mistakes on tax forms. Unknown information could be beneficial and a possible chance to receive more money. For many students, parents still handle tax-filing responsibilities.

General Manager of Liberty Tax Service in Keene, AJ Lorandeau, has worked in the tax field for a few years. He said he believes it is important for students to ask questions when filing their taxes.

“The more knowledgeable you are as a consumer, the more you will save on your taxes in your lifetime,” Lorandeau said.

Many taxpayers make mistakes and overlook deductions they can claim, resulting in overpayment, according to Lorandeau.

Some students may be unaware of the consequences when they choose not to file their taxes in time. According to Lorandeau, many students receive refunds, opposed to owing money to the Internal Revenue Service (IRS).

“They [tax payers] are cheating themselves out of hard-earned money that they may get back,” Lorandeau said.

He also added, in worst case scenarios, a student may owe the government and never file their taxes. In this case, he said the IRS would impose a penalty on top of the taxes already owed.

The IRS offers an installment plan for those in situations of debt who can’t come up with the entire amount at once.

“Many taxpayers are terrified of the IRS and audits and shouldn’t be,” Lorandeau said. “Most situations can be resolved by mailing in additional information and responding quickly to the request.”

Master Tax Advisor and the Office Manager for H&R Block in Keene, Terri Wisell, said if the deadline of April 15 is missed, an extension can be filed. She also said students should ask themselves if they have all their information before filling the needed forms.
George Corrette, an adjunct faculty member of the economics department and tax preparer, said students should know before they file if their status is going to be single and claim their own exemption or whether they’re going to be an exemption under their parents. Corrette said students should ask questions because every person has varying financial circumstances.

Better understanding of one’s financial situation can help when filing taxes and knowing which deductions are out there.

For students in particular, there are many educational deductions that are sometimes not claimed.

According to the Liberty Tax Service Web site, “Qualifying higher education expenses such as tuition and certain related expenses or fees you paid for yourself, a spouse or a dependent may be deductible.”

Also according to the Web site, the new American Opportunity Credit covers the cost of required course materials and extends the time a student can make a claim, which is from two to four years. The credit also allows up to $2,500 of college tuition and related expenses to be deducted. The site also stated 42 percent of that credit will be refundable.
This year, because of the economic stimulus package, more college expenses can be covered by 529 Plans, according to Liberty Tax Service.

The 529 Plan allows students to save and plan ahead for college costs.

The plan this year includes computer expenses, tuition, room and board, mandatory fees and books.

Some students may be unaware that one can still qualify for an educational tax break even if one withdrew from classes and is considered a part-time student.

An educational deduction, better known than others, is the deductible student loan.
Those paying back student loan’s can qualify to deduct $2,500 of their student loans interest if their income adjusts. 

There are many advantages for students and taxpayers. From March 8 through March 14, Liberty Tax Service will offer free tax preparation for students.

The decision to file taxes independently or with an agency can be beneficial as long as research is done and information is prepared ahead of time and prior to filing.

As the deadline approaches, knowing what to do in this situation really puts the taxpayer on top, and makes those two dreaded words not so scary.

Brittany Murphy can be contacted at bmurphy@keeneequinox.com.