In Jan 2021, the US unemployment rate fell to 6.3% since the pandemic hit the US economy in 2020. With tax season in the mist, many questions are left of how unemployment benefits and stimulus checks will affect their tax returns.
Students are often new to taxes and not always aware of what’s important to bring along when filing. A few tips on what is important to bring and keep a note of this year, and more down the line, could help benefit them in the long run.
Important notice from the Internal Revenue Service (IRS), the due date for filing taxes has been pushed back, “the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021.” stated on the official website on Mar. 17. This only applies to federal taxes.
IRS Commissioner Chuck Rettig spoke on the behalf of the extension, “This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers,” Rettig understands the Coronavirus may make tax season more stressful this years, but still stresses the importance of filing your taxes as soon as possible.
The W2 form is given to employees as a record of their income for the year prior. The W2 lays out how much money you made, how much was taxed, and what dependents are claimed. This is All that is taken into account when filing your tax return as a student.
Physical and electronic versions of the form are to be provided by the employer.
If a student is not currently employed, an important piece of information to bring is your 1098-T. This record is your official tuition statement. Your tuition, fees billed, grants, scholarships, and 3rd party billing payments are listed on this form. The corresponding tax year to the form will help determine the amount of tax return you are eligible to claim.
Login into Chabot-Las Positas Class Web, and type “1098-T” into the search bar where you will be able to access your tuition statement for the corresponding tax year.
One of the simplest things to do as a student is to keep receipts of all expenses related to school. Books, school supplies, and electronics needed in order for a student to proceed in their education have the potential to be written off on. Just as business owners are able to write off purchases as business expenses.
One thing that isn’t new but perhaps not well known, is that your unemployment benefits are taxable. As a receiver of unemployment benefits, you can choose to be “opt-into as withholding” or you can opt-out, but will have to pay back the specified amount.
Where and/or how to get your taxes done are big questions to consider, especially for students.
Sparkpoint is a soon-to-be-open service for students that will be offered at Chabot College. No official date has been posted, this service is stated to be:
1. Income Supports: Access to public benefits, food assistance, and free tax preparation
2. Education & Workforce: Going back to school, career advancement, and job search assistance
3. Financial Empowerment: Budgeting and saving, financial coaching, credit repair, and debt consolidation
Under Chabot’s Student Services page, followed by the student equity page you can find Sparkpoint.
They state, “SparkPoint Centers operate a variety of models to support the diverse families and households throughout the Bay Area”
The IRS’s official website reads, “you must file a 2020 tax return, even if you aren’t required to file.” It lists that anyone with an annual income of $72,000, or less, can file their taxes for free electronically under the IRS Free File Program.
Many people also use experienced tax filers from chains such as H&R Block or TurboTax. H&R Block has a series of packages that claim free for students, but if needed assistance from an analyst, prices begin at $69 online.
In 2020, many locations followed a strictly “drop off” type of service. Where instead of meeting with an expert, or filing online, a client would bring in all their information and have it saved for an expert to look over in a few days and approve.
The charges for these services are higher, around $200.
An Important notice under H&R Block’s Website:
“Emergency Financial Aid Grants for Students: If you received any emergency financial aid grants as a student, you don’t need to report this on your return. This is true even if you spent it on unexpected food, housing, health care, or child care expenses.”
IRS employer Tina Chavez has been working as a tax examiner for 30 years now. Chavez believes the best thing for new tax fillers, like students, is to go to a professional.
Throughout 2020, there were two stimulus checks issued out to the public. The first one issued out for up to $1200 and the second $600. This came after the approval of the 2020s Coronavirus Aid, Relief, and Economic Security Act which became official on Mar 27, 2020.
“You’ll be able to file a credit if you didn’t receive the stimulus check,” Chavez stated, when filing for your 2020 taxes, you can be eligible for the 2020 Recovery Rebate Credit.
For unemployment H&RBlock states, “You’ll report this (unemployment benefits) as income on your return. Thanks to the American Rescue Plan Act, you might be able to exclude up to $10,200 of your unemployment from your taxable income.”
The IRS also states that the fastest way to receive and return or stimulus checks are to have the money directly deposited into your bank account.
Sooner is always better when it comes to filing taxes, no comments have been made on how the extension will affect the following tax year.