By Caroline Nixon
When University of Georgia student, Reed Stout, thinks about filing his own taxes, he is overwhelmed by the complexity. A student at the Terry College of Business, Stout has analyzed taxes at a high level, but not from a personal finance perspective.
“I feel like there’s just so much unknown with (taxes). No one ever really sits you down and walks you through it and tells you the ins and outs of it,” he said.
Many students are caught in Stout’s predicament, said Professor Jennifer Chapman, head of the Masters of Accountancy program at UGA’s J. M. Tull School of Accounting. She attributed this fear of the unknown to a lack of tax awareness growing up and the unruly nature of taxes.
“Taxes change all the time. Which is scary because it is the great unknown,” she said. “And in traditional pop culture there’s a lot of misinformation out there about how the IRS really works. So, I think that contributes as well.”
Independent single filers who earn above the standard deduction of $12,550 must file for taxes, according to the Internal Revenue Service website. Chapman said even if students are making below the standard deduction, they are essentially cheating themselves out of their own money if they do not file.
“If you’ve got earned income of any sort, then more likely than not your employer has withheld both federal and state income taxes from your earnings. And so, the only way to get a refund of that money is to file a tax return,” Chapman said.
Depending on their financial situation, Chapman said students may qualify for refundable tax credits such as the Earned Income Tax Credit (EITC) and the American Opportunity Tax Credit.
According to the IRS, the EITC helps low to moderate income workers and families get a tax break. If one qualifies, the credit reduces taxes owed and potentially increases a refund. Chapman said the credit essentially provides people at the lower end of the income scale some additional cash to live on.
The American Opportunity Tax Credit (AOTC) is a credit for qualified education expenses paid for an eligible student for the first four years of higher education, according to the IRS. In contrast to the EITC, the AOTC is catered specifically for students. Only independents can claim the AOTC, which creates the assumption that many students don’t qualify for it. While Stout may not benefit directly from the EITC as a dependent, his parents can claim the credit if they have paid for a certain amount of their child’s college expenses, according to Chapman.
“It’s important to talk with a tax advisor to see where (the credit) should go,” she said. “It is a great way to get back $2,500 for any education expenses you’ve paid. Students need to watch out because UGA or their university should send you a form that you need to claim the credit.”
Stout and Chapman both suggested students should reach out to their parents for insight.
“They’ve been doing it for a while and it’s good to get a baseline before going off and doing my own thing,” said Stout.
Chapman also suggested not being afraid to ask questions and do one’s own research before filing for the first time. She also suggested reaching out to UGA’s Volunteer Income Tax Assistance (VITA) program. VITA will prepare one’s tax return for free.
Chapman urged students to take advantage of such resources to eliminate tax anxiety. “Taxes are not as scary as you think,” she said. “There is more benefit to (filing taxes) than people realize.”
Caroline Nixon is a journalism student at the University of Georgia.