Tax Information
- While our financial aid team members are not tax professionals, we are able to provide you with some guidance to help you understand how your taxes impact your financial aid. Please note that federal and state tax laws are always changing so any guidance that is being provided here could also change – it is important to visit the IRS website for the most current and up to date information regarding tax laws; you may also consult your tax advisor for assistance.
What does filing taxes have to do with my financial aid?
- The Free Application for Federal Student Aid (FAFSA) is based on your (and if you are a dependent student, your family’s) tax information from prior-prior year. The FAFSA application was created as a resource to evaluate a family’s financial strength and to help determine how much they may be able to contribute towards the student’s college education. By utilizing prior-prior tax information, this allows families to file their FAFSA sooner rather than later and in most cases, the tax information does not change drastically from year to year – in the cases that there are significant changes, there is a process in place where your school’s financial aid team can help you to review those changes.
Am I required to file a tax return?
- If you are working or planning on getting a job, you will want to have a general understanding of taxes to ensure that you are filing your taxes correctly as well as being financially secure.
- The determination of whether or not you are required to file a tax return is based on the wages that you received in the prior tax year as well as how much tax was withheld from your paycheck. The IRS sets filing thresholds each year so it would be best to review the IRS webpage to see if you are required to file.
Why should I file a tax return if I am not required to file?
- The IRS recommends that you file your taxes annually even if you are not required to file because you may be eligible for a refund!
- The IRS may also offer potential credits and/or deductions related to your educational expenses
- Credits vs Deductions
- Credits: Lowers the amount of income tax that you are required to pay.
- Deduction: Lowers the amount of income you have that is allowed to be taxed; this can be beneficial depending on your tax bracket.
The importance of filing your taxes correctly
- Completing your tax return accurately the first time allows you to have peace of mind in only having to complete them once for the tax year!
- Selecting the incorrect filing status could have major implications and result in having to amend your taxes, with the possibility of owing more in taxes than you originally anticipated.
- If you are required to amend your taxes, your original tax return will need to be processed by the IRS before you can amend your original tax return which can take several weeks to process.
- Common reasons to amend taxes include:
- Incorrect filing status
- Entering income information incorrectly
- Not claiming credits for which the taxpayer was eligible for
- Incorrectly claiming deductions
- Dependents reported incorrectly
- Common reasons to amend taxes include: