For many students, the subject of federal taxes can be confusing. You may not know exactly what to pay or how to pay it. Here are a few things to consider about federal taxes if you are a full-time student.
The most important factor for you to determine is whether or not you are a dependent of someone else. Many college students are still a dependent of their parents. This means that your parents will actually include you on their tax return. As a dependent, you will not have to worry about paying federal taxes. Your parents will include you on their taxes and you will not have to worry about paying anything. However, if you are no longer a dependent of your parents, you will have to file your own tax return and potentially pay taxes.
Another big factor in this process is whether or not you actually make any money. Most full-time students, will not have time to earn much money because of their commitments to their studies. If you do not have a job or any other sources of income, you will not have to worry about paying federal taxes. You will have to file a federal tax return, but you will not have any tax liability.
Many full-time students are awarded federal grants to help them with school. If this is the case, you will not have to use any of the grant money to pay taxes. A grant is like a gift from the government and they do not expect you to pay them back in the form of taxes.
Many people also wonder whether or not you have to pay taxes on scholarships that are awarded. In most cases, you will not have to pay anything for these. If you are a candidate for a degree, then you will not have to count scholarships as income. However, if you receive a scholarship and do not use it to obtain a degree, then you will have to count it as taxable income.
Students are eligible for two different programs that can give you a nice tax break. The Hope Credit and Lifetime Learning Credit allow you to offset any taxes that may be due. With the Hope Credit, you can get a $2500 credit on your taxes. With the lifetime learning credit, you can get up to a $2000 credit. The Lifetime Learning credit is designed for those that are pursuing continuing education. Since most full-time students do not have much tax liability if any, both of these programs can effectively wipe out any taxes that you will. With the Hope Credit, you can actually get up to $1000 back in cash if your tax liability is low enough.
If after all of these tax breaks, you still owe some federal tax, you will have to send a check to the IRS for the amount. Consult with a tax professional in order to make sure that your tax liability is calculated correctly. You can then mail a check to the closest IRS processing center. Your tax professional should be able to provide you with the address for the closest IRS center.