I’m 25, single, rent an apartment, make less than 100K a year, and have a 401k. Everything screams 1040EZ except I’m in graduate school for my MBA, and tuition costs were $10000 last year, most of that in student loans. This is my first time filing my taxes, and I’m clueless.
It seems like my situation is similar with about 10% of the US population. They should have a form exactly for this scenario (or maybe they should teach this in my MBA program!)
So should I be using a 1040 form because i’m in b-school?
The question isn’t “Should I be using a 1040 form because I’m in b-school?” It’s “Should I be using a 1040 form because I’m going to itemize deductions?”
Keep in mind that just because something is deductible doesn’t mean it does you any good. The amount that’s deductible has to be above your standard deduction (generally $5,350 for someone filing single). If you determine that $4,000 of your $10,000 tuition costs are deductible, it doesn’t make sense for you to claim it, because you’d forego your standard deduction. Use 1040ez
If $8,000 is deductible you’re better off itemizing on Schedule A and using Form 1040.
If I were you, I’d get some tax preparation software (Turbo Tax, Tax Cut, etc.) and use the interview process. Answer the questions the program asks, and the program will determine which form you should use.
Very interesting, thanks for the advice. I’m reading through the site now, I think the problem I might run into was not saving certain items that I could have had the ability to deduct, and might lower the total cost.
The $5,350 standard deduction, is that the tax dollars? So I would have approx needed to spend about $18,000 on tax deductible items?
Use 1040A (PDF). You don’t need to itemize deductions to deduct education expenses. Look at lines 18 and 19, read through the instructions (PDF) and you’ll figure it out; it’s really not hard.
Ignore the itemized deductions, you will use the standard unless there is something else you didn’t mention in the OP, e.g. large work expenses or charitable donations. Any competent tax prep software should pick the right forms to use. You will want to use either the Lifetime Learning Credit or the Tuition and Fees Deduction for your education expenses, whichever provides the greater benefit in giving you a bigger refund. Again tax prep software should show you the difference. If you do it by hand you would need to try it both ways to see which is better. I second that you will end up using 1040A, although there is no drawback to using the plain 1040.
I learned it by reading the instructions. The tax instructions are well-referenced with notes about relevant forms or sections you need to read. It’s even easier now that you can instantly pull a form up online. I can see taxes being a bigger. issue if you’ve got a lot of complicated deductions or aren’t particularly educated but I think the complexity of filing out tax forms has been oversold.
As thelurkinghorror mentions, if you use the electronic filing software, most of them will walk you through the process with a serious of questions and select the right form for you. I always do it by hand first so I know exactly how the numbers are calculated.
I learned by doing it for a living. I started doing general office work, then took some classes and started preparing them myself. I don’t do it anymore but things change very little from year to year. Many tax preparation chains offer classes in the fall which cover beginners to intermediate tax preparation. The IRS website has all the publications to look for in pdf format.
For your purposes, it’s not too hard, don’t feel overwhelmed. It’s hard to make mistakes with a simple employee return, the worst that can happen is that you can miss a credit (and that could be fixed with an amended return). The important thing to do is practice, and you could compare it to last year’s return. The IRS website posts a whole bunch of free and cheap tax preparation solutions, perhaps you can use one of those to see if there is anything you might miss.
One additional thing you might want to look into is how the 401k affects your tax situation. The amount you put in should be on your W-2 box 12 with a “D” next to it. that amount is nontaxable, and should be already reflected in your income (Box 5 minus 401k contribution should equal box 1). You might be able to claim a saver’s credit on the amount contributed, although if you were IIRC a full time student for more than 6 months, you can’t get it. Again, TurboTax or equivalent should ask these questions.
I assume your student loans are on deferment, so you don’t need to worry about them yet.
The last thing to worry about is state tax, and I am unfamiliar with PA so couldn’t tell you if there is anything to look out for, although the process is probably the same as Federal, but complete your federal return first.