Student Tax Return

It’s that time of the year again.  The time for beer that is cheaper than the usual cheap.  When pasta and “red sauce” 5 days a week consists of budgeting.  Springtime for post-secondary students is often a lean financial period.  Those savings from summer are badly depleted.  Often credit cards are rung up higher than most feel comfortable with.  Not only are bank accounts depleted, but that negative sign that indicates a line of credit is going lower and lower.  Students everywhere are craving their income tax returns.  If they are keeners they have already sent in their taxes and organized an automatic deposit system with the government to get their money as fast as possible.  Who are we kidding though, most of us will always wait until the last minute right?

Yay… Tax Time

In my general experience, most people find taxes one of the least motivating subjects on the planet; however, they can make a real difference to your financial situation if you plan them properly.  Students are notoriously bad for not caring about their tax situation.  They know that they will almost assuredly get back everything they paid in income tax for the year, so they don’t really look at the bigger picture.

Raise Your Hand If…

student tax return
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Here is what I see from about 90% of students out there.  They go to the nearest corner tax place which is almost always an H&R Block.  H&R has a great pull in where they will give you your student tax return up front for a small percentage of the return itself, plus a $30 fee.  This might actually be ok if you received some tax guidance for your money, but instead, they set you up with the lowest run on their ladder (and that ladder starts pretty low).  In the eyes of a tax service, students are a long-term investment, they’re playing the long game of brand management, and hoping they can build brand loyalty in you.  They know that as a low net worth student, doing your taxes isn’t going to generate a lot of profit for them; therefore, they set you up with someone who is probably only hired for the tax season, and in my experience they rarely speak fluent English.  This person then asks you the same basic questions that any online tax program such as TurboTax asks you.  In return for walking out with a money order, you lost a percentage of the return and $30, but you also probably lose quite a bit of future tax savings in the form of tax credits you can carry forward.

Just Because You Don’t Think About Tomorrow Doesn’t Mean It Won’t Come

Most students are not aware that they can either carry tax credits forward to a time when they can use them to their full advantage (likely the first year they work full-time) or they can choose to allow their parents to use them.  Since parents are often in fairly high tax brackets, it often makes the most sense from a purely financial standpoint to allow them to use the tax credits (especially if they are cool enough to cut you in on a share of the savings in return for helping them out).  Personally, I still have banked credits from my last couple years in school, and that is after I allowed my parents to use them for my first three years.  Because of that, I’m looking forward to a pretty juicy return this go around.

Tax Tips For Your Student Tax Return

Really, taxes aren’t that hard guys.  Take a quick look at the student tax return tips I wrote for last year.  For an hour or two of work, you can fully understand your tax situation and produce your own student tax return.  Justin and I both used TurboTax when we were in school and found it very user-friendly.  Eventually, we decided to get a professional to take a look at our situation due to the fact we were a little nervous about taking on the new situation created by our foray into the small business world.  There is something empowering that comes with knowing a little bit about how the tax system works, and there is definitely nothing wrong with a little extra money in your pocket for end-of-exam party days.  Break out your dad’s beer and celebrate good times!

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Ramona

Just to clarify that while you can transfer a portion of a student’s tax credit to a parent, there is no financial gain to doing so. A tax credit is worth 15% (federally) to whomever claims it. In my opinion, it is best to carry it forward for the student to help offset future tax payable. I think if the tax system was better understood, this would be the approach most parents would take.

My least favorite time of the year: Tax time.

I couldn’t imagine paying a fee + a percentage to get a return early, I’d just wait a couple weeks. I never knew that you could save your tax credits for later use, that’s pretty cool. :-)

My roommate literally paid $300 to H&R Block because he wanted the money right away, even the guy that was doing the return gave his head a shake…

Ramona

Ok, I see what you’re thinking. Not what I would do, but certainly an option.

Thanks for clarifying.

I am with Jen. That is crazy. Patience can be a money saver.

Call me crazy but I enjoy taking care of my taxes. Your learning something new too which is always a great thing!

Michael

I remember always doing my tax return about a week in advance as a student – always the 1040-EZ, of course. Drop that thing in the mail and get it in right before the deadline!

Nowadays? Turbotax for me. Even so, I must’ve spent close to 20 hours this year. What a joke…

I think many students are intimidated by the thought of doing their own taxes because of their perception of the difficulty level in completing the tax form. I agree with you…in most cases, Turbo Tax would be completely sufficient for a student tax form and is much easier that they think!

Russ

As a father who has put four children through university (last one is graduating this spring), I was a firm believer in claiming the maximum tuition tax credit possible from our kids. We set aside money for years in an RESP as well as a non-tax-sheltered in-trust account. The money came from us; the credit should come back to us. It’s as simple as that. A point to observe, too, is that only a portion of the credits can be transferred to a parent, so our kids each accumulated quite a surplus of credits that they were able to apply… Read more »

Good point Russ. i don’t think there is anything wrong with that stance at all. My parents and I basically split the tax credits. Maybe I’ll make a deal with my hypothetical children – if they learn what a tax credit/deduction is and how to do their own taxes I’ll give it to them ;)

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