College Connect: Filing Taxes Cause College Students to Confront their Money Skills

Posted By Crystal Beasley

By Lisa Fu

College is when many young adults take their first step to financial independence. It may be taking on a part time job or simply remembering to pay the rent on time, but college is when many students often confront their responsibilities with money and find their knowledge is lacking.

When it comes to filing taxes, for example, college students have many questions, but the answers aren’t usually part of the curriculum.

Maggie Clark, a junior international affairs and ecology major at the University of Georgia, wanted to clear up confusion about her tax return. Last April, Clark filed her taxes through a 1040ez form. But as she completed the form, she discovered something she thought was strange. Instead of the refund she was expecting, the form’s calculations showed she owed money.

“Why does my f1040ez form tell me that I owe the government money when I don’t actually make enough to have federal taxes?” Clark asked. She worked for two months during the summer as a camp counselor, earning $1,200 a month.

“I worked over the summer (and) got about $200 taken out of my paycheck each month,” Clark said, referring to how employers automatically withhold taxes from an employee’s paycheck. Nevertheless, she paid the $45 she thought she owed the Internal Revenue Service, based on what her tax form calculations showed.

“It seemed a bit counterintuitive,” Clark said. While she understood how to fill out the tax forms, Clark wanted to know more about how the IRS determines when she owes more taxes or when she can expect a refund.

Lance Palmer, an associate professor in financial planning, housing and consumer economics at UGA, explained Clark’s tax return didn’t show a refund because her parents may have claimed her as a dependent on their tax forms. When completing a W-4 form for their employer, many students report they are single and claiming one exemption for themselves, Palmer said. The W-4 form tells an employer how much they should withhold from the paycheck for taxes, according to Palmer. A problem arises when the W-4 form and the tax return don’t match.

“When it comes to filing their tax returns, they don’t claim that exemption for themselves because they are claimed as a dependent by their parents,” Palmer said. Being claimed by a parent means that the parents receives the exemption instead of the student. Palmer believes Clark may have claimed the exemption for herself on the W-4 form but not on her tax return.

“The right thing to do is to talk to your parents,” Palmer said. “Find out if they’re planning on claiming you as a dependent on their tax returns.”

If the parents decide they will be claiming the student as a dependent, the student should claim zero exemptions on their W-4 form. At the end of the year, the student won’t owe the government anything, Palmer explained.

Clark’s tax story had a happy ending. The IRS refunded her $45 two months after she mailed her check.

“That’s the nice thing about the IRS,” Palmer said. “They do a quick check on everyone’s tax returns to see if they’ve over paid or underpaid.”

Lisa Fu is a student at the University of Georgia’s Grady College of Journalism and Mass Communication.

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