As we begin the year, it is the time that people hate and love. Tax season has always given people some type of emotion, the good, the bad, the ugly. It is a time to see if your hard work has paid off or if you owe any money.
Although this can be very stressful, there is no need to worry. I spoke with Tax Preparer, Micheal Vickers, to try to give an idea of what it means to file taxes and how first-time tax filers can better prepare for their taxes this season.
The first piece of advice I received was about communication. For students filing for the first time, it is important to speak with your parents to find out if they are claiming you on their taxes (you can be claimed as a dependent up to the age of 23 if you are a full-time student). Which can be important to parents as it enables them to claim a valuable education tax credit.
I also asked Micheal, “What should a student claim on taxes? Such as textbook purchases, a parking pass, etc. Micheal says, “ I would have a conversation with your parents and the tax preparer first because the American Opportunity Credit (AOC) can only be claimed for four years and only for getting your Bachelor’s degree. If it will take you more than four years to get the degree, you are better off using the Lifetime Learning Credit (LLC) for the first year or two, then do the AOC. For the AOC, you can claim tuition, books, and equipment (e.g., computers). For LLC, it is only tuition and books.”
To the average person, taxes can be seen as something you just do, and that’s it. But it is something that everyone should care about. You can file using a tax service like TaxSlayer, H&R Block, or an in person service, and they all will prepare and e-file the return.
“The One Big Beautiful Bill” is the most recent tax bill, and I asked Micheal Vickers his thoughts on it. “It’s a mixed bag, some good, some head scratching, some bad. Good- SALT cap raised to $40k, child tax credit raised to $2200. The head scratching- the three ‘no tax on’ provisions. The bad- the end of the EV and energy efficient properties credit.” The main purpose of this new tax bill is to focus on tax relief, aiming to provide relief for low and middle income families. It is also looking to prevent a massive tax hike by making the 2017 TCJA tax rates from 10% to 37% permanently.
One of the good things about The One Big Beautiful Bill is that it extends a larger deduction and an alternative minimum tax threshold. This new law is an official permanent bill that allows for different solutions for your mortgage, bigger refunds, and higher deduction from social security for seniors.
The bad news is that the law will be projected to cost up to $3 trillion over the next decade.There is concern about the bill killing jobs in California with many factory closures and construction halts expected to kill 46,000 jobs over the next five years.The Bill introduces tax exemptions for overtime pay and tips, a deduction for auto loan interest, and the additional deduction available for seniors, which is a violation of tax principles that treats taxpayers equally.
The head scratching is based on the law that introduced a new savings vehicle called “ Trump Accounts” which is an incentive that includes a $1,000 government provided baby bonus for children born over the next four years but won’t be beneficiary until the child turns 18. Also the no tax on tips, it does not help the workers who do not make as much on tips so will likely get no deduction for tips.
I asked Chabot College student Laisha Penaloza about how she files and her thoughts on taxes. She said” My parents claim me as a dependent, so I don’t file my own taxes but I know that taxes are payments taken from people’s income or purchases to help fund government services. Employers usually withhold taxes from paychecks. At the end of the year people file a tax return to report their income, then the government usurps that info to decide whether someone owes more taxes or receives a refund.”
Laisha states she personally benefits from taxes because it helps her with FAFSA. “ That support helps me cover my school costs, so I don’t end up paying a lot for my classes out of pocket.”
Taxes to me have always been something I did not care about or really ever know much about but as I’ve gotten older it has become important to me.I have learned how to file taxes on my own, what W-2 forms are telling you, and the importance of filing correctly, especially if or when new tax bills are released. This new bill specifically has taught me a lot about the no tax on tips, at my current job we receive tips and for me to be knowledgeable about what it does for me on taxes was important.
The most important thing to do is always doing your own research or as each tax season goes on you learn more and find out better ways to turn tax season into a positive for you as best as you can. It can get hard and confusing with the words they use and become difficult to know if you’re filing correctly but the best advice is to talk to people, parents, and your tax preparer.
