You are required to file a federal income tax return if your income is above a certain level, which varies based on your filing status and age, as well as the type of income that you receive. For the year 2011, the following individuals must file a Federal income tax return: • If your filing [...]
Taxes for College Students
Taxable income, generally speaking, is the gross income of an individual or corporation, less any allowable tax deductions. Your taxable income is, in other words, the amount of your income that is subject to income tax. In the USA, what qualifies as “taxable income” is defined in the Internal Revenue Code Section 63. “Gross income” [...]
PAYROLL TAXES The term “payroll tax” can be used to describe two different types of similar taxes. The first type, known as withholding tax, is withheld from an employee’s wages by their employer. The employer then sends the withheld amount to the appropriate taxing authority. It is also referred to as a “pay-as-you-earn” tax. The [...]
Dependents A dependent is a person (other than the taxpayer themselves or their spouse) for whom the taxpayer can claim a dependency exemption. Each dependency exemption lowers the amount of income that can be taxed. For 2011, the exemption amount is $3,700 for each qualifying dependent. The term “dependent” refers to a qualifying child or [...]
When you fill out your income tax return, you must indicate on the form what your filing status is. There are five filing status options, based on marital status and other requirements. The following filing statuses are recognized by the IRS and must be reported on your personal income tax return (Form 1040). Review each [...]
MARGINAL TAX BRACKETS Many people do not understand marginal income tax and how it affects them. One of the most common misconceptions is that moving into a higher tax bracket (e.g., from a salary increase) has a negative impact for the taxpayer because more tax is due. For example, if you move from the 25% [...]
Tax deductions lower your taxable income and they are equal to the percentage of your marginal tax bracket. For instance, if you are in the 25% tax bracket, a $1,000 deduction saves you $250 in tax (0.25 x $1,000 = $250). There are three main types of tax deductions: the standard deduction, itemized deductions, and [...]
Tax credits can help reduce your liability dollar-for-dollar. That being said, they cannot reduce your income tax liability to less than zero. Simply put, your gross tax liability is the amount you are responsible for paying before any credits are applied. The majority of tax credits are non-refundable. This means that any excess amount expires [...]
There are many different IRS tax forms that you may come across throughout your life. However, as a college student, you probably only need to be concerned with the basics, such as Form W-2, Form W-4, and Form 1040. Tax Form W-2 Part of the “W series” of tax forms, IRS Form W-2 is a [...]
There are a number of different types of income tax returns. You must use the tax form that corresponds with your particular situation and allows you to claim the income, deductions, credits, etc. that apply to you. The most common types of income tax returns include the following: Form 1040 (U.S. Individual Income Tax Return) [...]
