Child in college w/$500 income on W-2 - File taxes?

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CT-Scott
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Child in college w/$500 income on W-2 - File taxes?

Post by CT-Scott » Tue Apr 10, 2018 9:49 am

For the last several years I've been doing 90% of my taxes myself, but then handing it over to someone else to actually fill out the forms (which they used software for). I often found mistakes that needed to be fixed. Last year, the woman I had been using for a couple of years decided to retire, so I finally bit the bullet and bought the H&R Block software and did them myself.

This year, I waited till the last minute, and am just now starting them today, and I realize that I have a new dilemma that I've never had to deal with before. My daughter is a Sophomore in college and she worked a summer internship where she was paid a whopping $500 minus federal taxes, SS, and Medicare. No state taxes (CT) were withheld.

I've been used to claiming her as a dependent, but I'm pretty sure the combined income from my wife and myself (which is fairly close, BTW), results in us getting no tax benefit from claiming her (we get hit pretty hard by AMT - thankfully that will change when doing our taxes next year). Also, there are education credits that we've been ineligible for due to our income. I'll add that my daughter has a scholarship, but it doesn't cover the full tuition, and she lives on campus so we've also got housing and food plan expenses for her.

So now I'm thinking that I should *not* claim her as a dependent and I *should* fill out taxes for her where she might be able to be eligible for a credit. Does that sound right?

Also, I have H&R Block Deluxe Homeowners/Investors edition, which I believe includes 5 free Federal e-files, but only one state. Do I need to even fill out a state return for her? If not, is there potentially CT credits that would make it beneficial to fill out a state return for her?
Last edited by CT-Scott on Wed Apr 11, 2018 7:40 am, edited 1 time in total.

RudyS
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by RudyS » Tue Apr 10, 2018 10:00 am

The question on "her" return is whether she CAN be claimed by another, not whether she IS claimed. So you have no choice. It's common to misunderstand the options.

CT-Scott
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by CT-Scott » Tue Apr 10, 2018 10:50 am

Sorry, I might be dense, but I'm not sure what you're trying to tell me.

mlipps
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by mlipps » Tue Apr 10, 2018 11:00 am

What RudyS is saying is that since your daughter can be claimed by you, she is not allowed to claim herself.

Furthermore, there are restrictions on the refundable portion of the American Opportunity Credit for students under 24 to prevent the exact situation that you are attempting. She therefore would not be able to receive any benefit for claiming her education expenses because at her income none of the non-refundable education credits would increase her refund.

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teen persuasion
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by teen persuasion » Tue Apr 10, 2018 12:40 pm

Yes, have her file a tax return, if only to get a return of her federal withholdings, and for the experience.

If $500 is her only income (investments, taxable scholarships, etc?) then she won't owe any federal income tax, since her single standard deduction will more than cover her income. She won't get a personal exemption since she is your dependent, but she doesn't need it, either, at that income level.

It's not hard for a simple return, I walked my 15 year old thru his first return when he worked at a diner. She can probably file 1040EZ.

CT-Scott
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by CT-Scott » Tue Apr 10, 2018 1:18 pm

OK, so if she'd only be able to get whatever was withheld for Federal taxes? That would be $2.

I'm assuming that she can't get back the SS ($31) or Medicare ($7.25), right?

So if all she stands to get back is $2, do I need to fill out the taxes at all for her? I'm all for getting money back from the government, but it doesn't seem worth the trouble for $2.


oldfatguy
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by oldfatguy » Tue Apr 10, 2018 1:38 pm

CT-Scott wrote:
Tue Apr 10, 2018 1:18 pm

So if all she stands to get back is $2, do I need to fill out the taxes at all for her?
No, she should be doing it herself, IMO.

Spirit Rider
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by Spirit Rider » Tue Apr 10, 2018 2:24 pm

oldfatguy wrote:
Tue Apr 10, 2018 1:38 pm
CT-Scott wrote:
Tue Apr 10, 2018 1:18 pm
So if all she stands to get back is $2, do I need to fill out the taxes at all for her?
No, she should be doing it herself, IMO.
+1 The life skills value is worth far more than $2.

Bacchus01
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by Bacchus01 » Tue Apr 10, 2018 5:40 pm

Find her ROTH

File a return

MadDwag
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by MadDwag » Tue Apr 10, 2018 9:15 pm

Bacchus01 wrote:
Tue Apr 10, 2018 5:40 pm
Find her ROTH

File a return
+1. Start the Roth early. She'll be thankful years from now.

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BL
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by BL » Tue Apr 10, 2018 11:40 pm

I agree that it is a good thing for her to file the 1040, even if not required. I suggest using the 1040 instead of EZ, just to get used to that form which she will use in the future. The best time to learn is when it is very simple. If she is feeling rushed to get it done on time, she can file an extension, then she will have until mid-October to finish it.

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celia
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by celia » Wed Apr 11, 2018 12:41 am

If she will be applying for financial aid in 2 years (2019-2020 school year), she will need a 2017 tax return to submit. Even if she doesn't need any grants or loans, campus jobs often require a previous tax return be filed with the college.

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teen persuasion
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by teen persuasion » Wed Apr 11, 2018 7:15 am

celia wrote:
Wed Apr 11, 2018 12:41 am
If she will be applying for financial aid in 2 years (2019-2020 school year), she will need a 2017 tax return to submit. Even if she doesn't need any grants or loans, campus jobs often require a previous tax return be filed with the college.
Can you explain this further? This has not been my experience for any of our 4 kids that have attended college (so far), all at different universities. DS4 just filed his first 1040 this year, his sophomore year in college, due to his earnings last summer on campus as an orientation leader.

Perhaps you mean for grad school, as OP mentioned his child was a junior in college now.

CT-Scott
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by CT-Scott » Wed Apr 11, 2018 7:44 am

teen persuasion wrote:
Wed Apr 11, 2018 7:15 am
Perhaps you mean for grad school, as OP mentioned his child was a junior in college now.
Minor correction: I misstated it in my original post...she's actually a Sophomore. I wish she was one year farther along. :)

Anyway, thanks for the replies. Given the limited time left, I'm not sure how much participation I'll be able to get from my daughter, but if I can use my version of H&R Block Deluxe to file her taxes as well, I'll plan to do that so she can get the $2 back.

Chip
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by Chip » Wed Apr 11, 2018 7:53 am

CT-Scott wrote:
Wed Apr 11, 2018 7:44 am
Anyway, thanks for the replies. Given the limited time left, I'm not sure how much participation I'll be able to get from my daughter, but if I can use my version of H&R Block Deluxe to file her taxes as well, I'll plan to do that so she can get the $2 back.
Scott,

I agree with others that this is a great teachable moment for her. Consider having her file a Form 4868 (filing extension), then complete her 1040 at her leisure over the summer.

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BL
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by BL » Wed Apr 11, 2018 8:29 am

Chip wrote:
Wed Apr 11, 2018 7:53 am
CT-Scott wrote:
Wed Apr 11, 2018 7:44 am
Anyway, thanks for the replies. Given the limited time left, I'm not sure how much participation I'll be able to get from my daughter, but if I can use my version of H&R Block Deluxe to file her taxes as well, I'll plan to do that so she can get the $2 back.
Scott,

I agree with others that this is a great teachable moment for her. Consider having her file a Form 4868 (filing extension), then complete her 1040 at her leisure over the summer.
+1
Doing it for the experience is great, and having a copy to start up her filing system is also worthwhile, whether she sends it in or not.

I don't see that she needs to file, so she doesn't really have a deadline:
https://ttlc.intuit.com/questions/19014 ... -dependent
or just Google "do I need to file income taxes?" to get IRS page on it. It differs depending on whether she is a dependent, but she doesn't have enough income in either case. She is simply filing to get a refund, and it would be especially useful to have in her files if she puts the $500 into a Roth IRA by April 17, 2018: (CD or savings account at a bank, or a low-cost brokerage where she could buy an index fund/ETF such as total stock market ETF, for instance.)

jj45
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by jj45 » Wed Apr 11, 2018 11:02 am

celia wrote:
Wed Apr 11, 2018 12:41 am
If she will be applying for financial aid in 2 years (2019-2020 school year), she will need a 2017 tax return to submit. Even if she doesn't need any grants or loans, campus jobs often require a previous tax return be filed with the college.
My kids college has a non-filing statement that students and parents can submit if they did not file a tax return. The form asks for income and W2s and 1099s.

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dodecahedron
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by dodecahedron » Wed Apr 11, 2018 11:32 am

teen persuasion wrote:
Wed Apr 11, 2018 7:15 am
celia wrote:
Wed Apr 11, 2018 12:41 am
If she will be applying for financial aid in 2 years (2019-2020 school year), she will need a 2017 tax return to submit. Even if she doesn't need any grants or loans, campus jobs often require a previous tax return be filed with the college.
Can you explain this further? This has not been my experience for any of our 4 kids that have attended college (so far), all at different universities. DS4 just filed his first 1040 this year, his sophomore year in college, due to his earnings last summer on campus as an orientation leader.

Perhaps you mean for grad school, as OP mentioned his child was a junior in college now.
I agree--I personally know a lot of young people who have obtained undergrad financial aid without having filed a tax return. Our VITA site regularly sees undergrads on financial aid who are filing their first tax return even though it is not their first year in college. They have attended a wide variety of colleges. There might be some individual colleges with idiosyncratic requirements but it is certainly not a universal FAFSA or College Board CSS generic requirement.

Grad school might well be different.

I once met a young woman in her early 20s, a recent college graduate, who was applying to medical school and who said she had never had any income or reason to file during college. She was convinced (rightly or wrongly--I have no idea) that she needed to file prior year tax returns for all five years since she had entered college. I showed her where to find all the prior year forms online and she printed out the PDFs and dutifully filled out zeroes in each one, signed them, made two copies of each one, one for her own records and one for the financial aid process, and sent the originals off to the IRS. (It is impossible to efile a tax return with all zeroes, so paper file was her only option.) The IRS has forms and instructions going all the way back to the early 1980s.

Spirit Rider
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by Spirit Rider » Wed Apr 11, 2018 2:36 pm

Some college financial aid offices may require an IRS Verification of Non-filing Letter if you have not filed a tax return for the applicable year. This is usually only done when there are concerns with the truthfulness of the FAFSA.

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celia
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by celia » Wed Apr 11, 2018 2:52 pm

teen persuasion wrote:
Wed Apr 11, 2018 7:15 am
celia wrote:
Wed Apr 11, 2018 12:41 am
If she will be applying for financial aid in 2 years (2019-2020 school year), she will need a 2017 tax return to submit. Even if she doesn't need any grants or loans, campus jobs often require a previous tax return be filed with the college.
Can you explain this further? This has not been my experience for any of our 4 kids that have attended college (so far), all at different universities. DS4 just filed his first 1040 this year, his sophomore year in college, due to his earnings last summer on campus as an orientation leader.

Perhaps you mean for grad school, as OP mentioned his child was a junior in college now.
My point was not about filing/not filing a return, but on what it is used for. I'm not sure which part(s) you are asking about, so I will try to clarify all of it.

1. When my kids were in college, the financial aid office needed tax returns for the previous year to verify your income. About 2 or 3 years ago, it was changed to the tax return from the year before that, probably since you don't have to file the previous return until October 15, which is after the school year started. I used to do my taxes right after I got all the tax forms so I could apply for financial aid before the money was all "gone" (at least at the colleges my kids attended). Now everyone can file at the start of the financial aid filing season. Although many of us are now finishing up our 2017 taxes, that tax return is not needed for the 2018-2019 school year. They currently want the 2016 return for the 2018-2019 school year.

I learned about this online, at someplace called Bogleheads.org. :beer

2. Some colleges (I don't know which ones) will only allow students to work on-campus once they apply for financial aid, even if they don't need it. I assume that the college has some campus jobs funded through work-study (or similar) that has a financial need requirement as federal funds may be used to pay the student. Rather than treating some jobs different than others and singly out certain students, it is probably just easier to have all the students file for financial aid if they want a campus job. Then they can also change jobs mid-year without anyone thinking about the financial aid filing requirement.

Campus jobs that my kids had included:

* projecting movies in the student union (free movies! actually it was probably free to the attendees, too)
* giving campus tours
* taking good notes during class and photocopying them and turning them in to the disabled student's assistance department for some student in the same class (who was not identified to my child). Essentially, this is getting paid to go to class! The instructor announced this need at the beginning of the semester for relevant classes.
* helping on recruiting in your home area when a college representative is in town (plus get free round-trip airfare home, housing provided by your family :D )
* resident assistant in the dorms (free room and board)
* teaching assistant (usually for grad students, free/reduced tuition)

These are in addition to all the help needed in the dining halls, department offices, bookstores, gym attendants, sports assistants, computer/tech centers, orientation and graduation assistants.

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teen persuasion
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by teen persuasion » Wed Apr 11, 2018 6:27 pm

Thanks for the details, Celia. What I was referring to was that I have not seen a requirement that students file tax returns with the schools. I have had to provide mine/DH's return, and IFF the kids had filed due to income, theirs was requested for FA verification, but never for an on campus job (even when they were awarded work study). But you are correct that every school is different, so there very well may be some that do insist on non-necessary tax returns.

CT-Scott
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by CT-Scott » Tue Apr 17, 2018 6:48 am

mlipps wrote:
Tue Apr 10, 2018 11:00 am
What RudyS is saying is that since your daughter can be claimed by you, she is not allowed to claim herself

Furthermore, there are restrictions on the refundable portion of the American Opportunity Credit for students under 24 to prevent the exact situation that you are attempting. She therefore would not be able to receive any benefit for claiming her education expenses because at her income none of the non-refundable education credits would increase her refund.
So I did claim my daughter as a dependent on my tax return, but I'm fairly certain that it did not benefit me in any way (I get hit pretty hard by AMT). If I'm interpreting things correctly in the H&R Block software and other guidance online, it does seem like I could have chosen *not* to claim her as a dependent.

Then, when going through the software for her tax return (remember, she only made $500 income and had $2 of Federal tax withheld), we got to the section about the American Opportunity Credit, and it sounds like she *could* claim that and get a credit back, except that because I included her as a dependent on my tax form, she can no longer do that. If so, it sounds like you gave me some bad guidance. If not, can you elaborate on why she still wouldn't have been eligible for the AOC?

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teen persuasion
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by teen persuasion » Tue Apr 17, 2018 7:22 am

Is your daughter under age 24 and is her earned income less than half of her support? Then she is not eligible for the refundable portion of the credit. If she owed any tax, she could benefit from the nonrefundable portion of the credit.

Look at page 6 of the instructions for form 8863 for the AOTC.

My kids have run up against this quirk of the rules, even when they were legitimately not our dependents in college, because of the way scholarship income and loans used for living expenses vs "earned" income are defined by the IRS for this credit. We couldn't claim them to get the credit, they couldn't get the refundable credit.

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StevieG72
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by StevieG72 » Tue Apr 17, 2018 7:36 am

Looking at this link it appears she does not need to file a return.....

https://www.irs.gov/publications/p929

While others say great learning experience which is true, it is crunch time and I would not bother. In addition you may have to use a separate software to file federal and state for free. Most consumer software versions charge for state returns, however their are plenty of free file options online.

I am glad I am not the only one! I just finished up taxes for two friends last night and will be doing a final review and sending mine this evening.
Fools think their own way is right, but the wise listen to others.

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BL
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by BL » Tue Apr 17, 2018 8:01 am

BL wrote:
Wed Apr 11, 2018 8:29 am
Chip wrote:
Wed Apr 11, 2018 7:53 am
CT-Scott wrote:
Wed Apr 11, 2018 7:44 am
Anyway, thanks for the replies. Given the limited time left, I'm not sure how much participation I'll be able to get from my daughter, but if I can use my version of H&R Block Deluxe to file her taxes as well, I'll plan to do that so she can get the $2 back.
Scott,

I agree with others that this is a great teachable moment for her. Consider having her file a Form 4868 (filing extension), then complete her 1040 at her leisure over the summer.
+1
Doing it for the experience is great, and having a copy to start up her filing system is also worthwhile, whether she sends it in or not.

I don't see that she needs to file, so she doesn't really have a deadline:
https://ttlc.intuit.com/questions/19014 ... -dependent
or just Google "do I need to file income taxes?" to get IRS page on it. It differs depending on whether she is a dependent, but she doesn't have enough income in either case. She is simply filing to get a refund, and it would be especially useful to have in her files if she puts the $500 into a Roth IRA by April 17, 2018: (CD or savings account at a bank, or a low-cost brokerage where she could buy an index fund/ETF such as total stock market ETF, for instance.)
Setting up a Roth with $500 could be the best result of this exercise. Today is the deadline!

deskjockey
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by deskjockey » Tue Apr 17, 2018 11:00 am

CT-Scott wrote:
Tue Apr 17, 2018 6:48 am
mlipps wrote:
Tue Apr 10, 2018 11:00 am
What RudyS is saying is that since your daughter can be claimed by you, she is not allowed to claim herself

Furthermore, there are restrictions on the refundable portion of the American Opportunity Credit for students under 24 to prevent the exact situation that you are attempting. She therefore would not be able to receive any benefit for claiming her education expenses because at her income none of the non-refundable education credits would increase her refund.
So I did claim my daughter as a dependent on my tax return, but I'm fairly certain that it did not benefit me in any way (I get hit pretty hard by AMT). If I'm interpreting things correctly in the H&R Block software and other guidance online, it does seem like I could have chosen *not* to claim her as a dependent.

Then, when going through the software for her tax return (remember, she only made $500 income and had $2 of Federal tax withheld), we got to the section about the American Opportunity Credit, and it sounds like she *could* claim that and get a credit back, except that because I included her as a dependent on my tax form, she can no longer do that. If so, it sounds like you gave me some bad guidance. If not, can you elaborate on why she still wouldn't have been eligible for the AOC?
As someone posted earlier, your daughter is not eligible for the refundable AOC because she is under 18, has at least one parent still living, and is not filing a joint return this year. Notice that none of the three conditions for eligibility for the refundable AOC relate to being claimed as a dependent (or not). If you don't claim her as a dependent, she is only eligible for the nonrefundable version of the credit (which simply reduces the tax you pay instead of actually giving you money above and beyond what you owe). Since she owes no federal income tax on her $500 income anyway, claiming her as a dependent and preventing her from using the nonrefundable AOC doesn't impact her at all one way or the other.

CT-Scott
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Re: Child in college w/$500 income on W-2 - File taxes?

Post by CT-Scott » Tue Apr 17, 2018 7:41 pm

deskjockey wrote:
Tue Apr 17, 2018 11:00 am
As someone posted earlier, your daughter is not eligible for the refundable AOC because she is under 18, has at least one parent still living, and is not filing a joint return this year. Notice that none of the three conditions for eligibility for the refundable AOC relate to being claimed as a dependent (or not). If you don't claim her as a dependent, she is only eligible for the nonrefundable version of the credit (which simply reduces the tax you pay instead of actually giving you money above and beyond what you owe). Since she owes no federal income tax on her $500 income anyway, claiming her as a dependent and preventing her from using the nonrefundable AOC doesn't impact her at all one way or the other.
Thank you very much, that clarifies it perfectly.

We submitted her Federal return thru the H&R Block software today. So a $2 refund should be on its way several weeks from now. Woohoo!

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