By Savannah Sicurella
When University of Georgia student Madeline Bradley filed income taxes for the first time in January, she was flustered. Her confusion felt ironic, she said — even though she was in her final year of her accounting major, the tax forms and filing systems she navigated looked like they were coded in another language.
Now a graduate student in UGA’s accounting program, Bradley is preparing to clerk with the university’s Volunteer Income Tax Assistance Program. The program provides free tax services to communities throughout Georgia, and by working with the program, Bradley hopes to ensure others aren’t as unprepared as she was when filing.
“Taxes in general sound like such a scary, adult thing,” Bradley said. “I feel like the experience of doing something new you’ve heard about for your whole life is scary and intimidating. You can feel nervous about starting it, but using software and doing research can be very helpful.”
Completing a tax return for the first time can be a difficult or confusing task, particularly for students filing as independent of their parents, said Lance Palmer, a financial planning professor at UGA.
“The U.S. income tax system is one of the most progressive in the world, and because of that, it gets a little bit complicated,” Palmer said. “There’s lots of social, political and economic policy trying to be implemented through the tax code, and because of all of those different policy intentions and agendas, it creates complexity in the tax return.”
A student should begin filing their own tax returns when they earn an income of over $12,200, Palmer said. Though the situation will vary depending on financial circumstances, a student should file as an “independent” of their parents if they pay for more than half of their living expenses and as a “dependent” if they receive financial support.
There are advantages to filing as an independent, Palmer said. Undergraduate students filing as an independent can claim the American Opportunity Tax Credit, a refundable credit for education expenses, including tuition, fees and course materials, according to the IRS. If one files as a dependent, the taxpayer that claims them will receive the credit.
Filers can encounter a number of forms, but students will likely only need a W-2, a form received from employers, a 1099 form if they worked as an independent contractor and a 1098-T, which accounts for funds received from scholarships, fellowships, grants and qualified tuition expenses, Palmer said.
Students must claim all non-tax exempt scholarships as taxable income, Palmer said. If the scholarship just covers tuition and fees, it is likely exempt, but any funds used by students to pay for room and board or living expenses are taxable. Failing to report taxable scholarships can disqualify students from receiving the credit or get audited by the IRS, Palmer said.
Despite the complexity and fine print of the tax code, free or low-cost tax preparation software exists to simplify the process of filing. Both Bradley and Palmer recommend students e-file their returns with programs like TurboTax or Free Tax USA.
Bradley also recommends all first-time filers to do thorough research on the IRS website beforehand. It’s essential to know how to properly complete your forms and input the correct information into the system, and once someone gets the lay of the land, it gets easier from there, she said.
“I was not looking forward to filing my taxes for the first time,” Bradley said. “I did not know what I was doing, but once I did my research and got the momentum going, it went a lot smoother than I expected it to.”
Savannah Sicurella is studying journalism at the University of Georgia. She is a 2020 Cox-SABEW Fellow, a training program in partnership with UGA’s Cox Institute for Journalism Innovation, Management & Leadership.