January 31 marked the last day for employers to send out W-2 forms, and so marks the beginning of the tax preparation season. Even though most single filers with income of less than $7,200 ($4,400 for filers who can be claimed as dependents on parents' returns) are not required to file a tax return, filing a return is the only way to obtain a refund on any federal tax paid, or to qualify for certain refundable tax credits.
There are no major changes in the tax code for the 2000 filing year. However, students should be aware of several provisions of the Taxpayer Relief Act passed by Congress in 1997. This law established the Hope Scholarship Credit and the Lifetime Learning Credit, which allow most students and/or their parents to claim tax credits for qualifying educational expenses. Qualifying expenses include tuition charges and fees for room, board, student activities, athletics, insurance, books, equipment and transportation.
The Hope Scholarship Credit allows a $1,500 credit per year for the first two years of undergraduate education. The Lifetime Learning Credit allows a credit amounting to 20 percent of the first $5,000 of qualifying educational expenses for all subsequent years of school. Both credits phase out at certain income levels, but most students earning less than $50,000 per year are eligible to take the full credit. In order to claim the credit, filers have to submit IRS Form 8863 along with their ordinary tax return.
"These credits can really add up to a sizeable tax refund. Last year I thought that I would end up owing money to the government, but I actually got a sizeable refund," said Kyle Whung, a U of M student. "The form for claiming the credits is pretty simple. It only takes about 15 minutes to complete."
All students that have paid any tuition or other qualifying expenses to University of Memphis during the tax year 2000 will receive a form 1098-T detailing their expenses. These forms were mailed out yesterday, according to Dawn Perry of the University Student Counseling Office. "Students who do not get a 1098-T in their mailboxes within the next week should call and ask for a replacement," Perry said.
The Fogelman College of Business will not be holding a tax fair this year, although students who need help filing their taxes should consider consulting with a tax preparer at one of the local Memphis Library branches. "Students should take advantage of the tax consultations and electronic filing because its free and easy," said Betty Faulkner, director of resources for Memphis Regional Library. Tax assistance will be offered at the Highland branch on Thursdays from 8 a.m. - 7 p.m., and the Poplar-White Station branch will offer assistance on Fridays from 8 a.m.-6 p.m.
"Patrons who are interested in this service should bring their W-2 forms and any other documents that will be needed in filing their taxes," said Faulkner.
An additional legacy of the Clinton administration is the deductibility of interest paid on educational loans, subject to certain income restrictions. Qualifying interest payments will be reported by financial institutions on a form 1098-E.
This year's tax calendar gives some extra hope to procrastinators. The deadline for filing 2000 tax returns is April 16, as April 15 falls on a Sunday.
The Internal Revenue Service website, www.irs.treas.gov, contains up-to-date information on the tax code and an overview of filing options, including paper forms, tele-file instructions and a list of authorized vendors for the e-file service.
Additional information about educational tax credits can also be found at www.1098-T.com.
