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Filing Your Income Taxes
Transcript of Filing Your Income Taxes
Michigan State University College of Law
Alvin L. Storrs Low-Income Taxpayer Clinic
610 Abbot Rd.
East Lansing, MI 48823
January 29, 2016
Do I Have to File a Tax Return?
Filing Threshold for Single Filers
You must file if your gross income for 2015 was at least $10,300.
You need to file if you have withholdings, have made estimated tax payments, or need to take advantage of a refundable credit like the American Opportunity Credit.
If Your Filing Status is Married Filing Jointly
You must file a return if:
Both you and your spouse were under 65 at the end of 2015, and your gross income for 2015 exceeds $20,600.
If you or your spouse were 65 or older at the end of 2015, and your gross income for 2015 exceeds $21,850.
If you and your spouse were 65 or older at the end of 2015, and your gross income for 2015 exceeds $23,100.
You must file if your gross income for 2015 exceeds $4,000, regardless of your age.
If Your Filing Status is Married Filing Separately...
Which Form Should I Use to File?
What Counts as Gross Income?
A Scholarship or Fellowship is Tax-Free, But Only If:
You are a candidate for a degree at an eligible institution;
The payment does not represent payment for teaching, research, or other services required as a condition for receiving the scholarship; AND
You use the scholarship or fellowship to pay qualified education expenses.
Qualified education expenses do not include the cost of:
Room and board
Clerical help, or
Equipment and other expenses that are not required for enrollment in, or attendance at, an eligible educational institution
Scholarships, Athletic Scholarships, and Fellowships are Excluded from Gross Income
Student Loan Interest
You can reduce your income subject to tax by up to $2,500 for student loan interest you paid in 2015.
The loan must have been taken out solely to pay qualified education expenses, and cannot be from a related person or made under a qualified employer plan
You can deduct interest paid during the remaining period of your student loan
You cannot claim a Student Loan Interest Deduction if your MAGI (modified adjusted gross income) is $80,000 or more ($160,000 or more if you file a joint return).
Your lender will send you a Form 1098-E. The amount of interest you paid on your student loan for the year will be reported on box 1 of this form.
The American Opportunity Credit
The Lifetime Learning Credit
claim an educational credit if any of the following applies:
Your filing status is
married filing separately,
You are listed as a
in the exemption section of another person's tax return, or
You (or your spouse) were a
for any part of the tax year.
You can only claim
of the two credits: either American Opportunity Credit or Lifetime Learning Credit.
Your modified adjusted gross income cannot be above a certain dollar limitation.
American Opportunity Credit
Up to $2,500 credit per eligible student (the cost of tuition, fees, and course materials paid during the taxable year).
Importantly, 40% of the credit (up to $1,000) is refundable. This means you can receive a refund even if you do not owe taxes.
Available only for the first four years of post-secondary education
Must be pursuing an undergraduate degree
Must be enrolled at least half-time
The Lifetime Learning Credit
Up to $2,000 credit per return
Available for all years of post- secondary education and for courses to acquire or improve job skills
Do not need to be pursuing a degree
What are Qualified Expenses for the Education Credits?
For the education tax credits, qualified expenses have been expanded to include expenditures for course materials, as well as for tuition and required fees.
For this purpose, the term "course materials" means books, supplies and equipment needed for a course of study that are either purchased as a condition of enrollment or attendance.
an iPad can be considered a “course material” ONLY if it is a condition of enrollment or attendance at the educational institution.)
Some or all of these expenses will be recorded on Form 1098-T, Tuition Statement, which you should receive from MSU.
Room and board
Education expenses paid with tax-free funds. You must reduce the amount of expenses paid with tax-free grants, scholarships and fellowships, and other tax-free education help
Nonacademic fees, such as student activity fees, athletic fees, insurance expenses, or other expenses unrelated to the academic course of instruction
Expenses relating to any course or other education involving sports, games, or hobbies, or any noncredit course UNLESS the course or activity is part of degree program.
The following expenses do not qualify for the Education Credits:
When are Returns Due?
Individual returns are
due on April 15, but this year are due April 18 because of a holiday
; can file by mail or electronically
Timely mailing = timely filing (date postmarked/mailed shall be deemed date delivered)
If due date lands on a Saturday/Sunday/holiday, then returns are due the next business day
If you are unable to file your return by the due date, you may be able to get an automatic 6 month
extension - Form 4868
This extension is an extension of the filing deadline only, not the deadline for payment; however, there is no technical requirement that you send in payment with the extension if you are an individual. Sending in estimated tax payment with extension may help with interest/penalties.
If no payment is made with the extension filing, a late payment penalty may apply.
Filing Multiple State Returns
What if I earn income in two or more states?
Nonresident State Return/Part Year Resident
Michigan Schedule 1
Each state has its own rules, so make sure to check with each state; instructions for filing state returns are posted on the states' websites
Where Do I Send My Federal Income Tax Return?
Don't forget to sign the return -- if it's not signed, the IRS will return it to you and it may be viewed as untimely filed!
The Graduate Assistantship stipend is considered income that is subject to tax (it is wages for services you provide to MSU); it must be reported on your income tax return
Standard Graduate Assistantships include a tuition waiver for the first 9 credits; students must pay tuition for additional credits
1098-T (received for tuition payments) may be used to claim education credit on 1040
Any additional wages or salary from other sources also count as income that is subject to tax and needs to be reported on your tax return
File a 1040EZ if:
Your filing status is
single or married filing jointly
You, and your spouse if filing a joint return, were
under age 65
on January 1, 2015, and not blind at the end of 2014
is from wages, salaries, tips, taxable scholarship and fellowship grants, unemployment compensation, or Alaska Permanent Fund dividends, and your
taxable income is less than $100,000.
Your earned tips, if any, are included in boxes 5 and 7 of your Form W-2
You do not owe any household employment taxes on wages you paid to a household employee.
You are not a debtor in a Chapter 11
case filed after October 16, 2005.
do not claim any adjustments to income
, such as a deduction for IRA contributions, a student loan interest deduction, an educator expenses deduction, or a tuition and fees deduction.
do not claim any credits other than the earned income credit
If you file Form 1040EZ, you
cannot itemize deductions
or claim any adjustments to income or tax credits (other than the earned income credit).
File a 1040A if:
Your income is only from wages, salaries, tips, taxable scholarships and fellowship grants, interest, or ordinary dividends, capital gain distributions, pensions, annuities, IRAs, unemployment compensation, taxable social security or railroad retirement benefits, and Alaska Permanent Fund dividends
taxable income is less than $100,000
do not itemize deductions
You did not have an alternative minimum tax adjustment on stock you acquired from the exercise of an incentive stock option
Your taxes are only from the Tax Table, the alternative minimum tax, recapture of an education credit, Form 8615 (PDF) or the Qualified Dividends and Capital Gain Tax Worksheet
only adjustments to income
are the IRA deduction, the student loan interest deduction, the educator expenses deduction, the tuition and fees deduction, and
The only credits you are claiming are the
credit for child and dependent care
earned income credit
, the credit for the
elderly or the disabled
child tax credit
, the additional child tax credit, or the
retirement savings contribution credit
File a 1040 if:
Anyone can use this form, but you must use this form if your
taxable income is $100,000 or more
You have certain types of income such as unreported tips; certain nontaxable distributions; self-employment earnings; or income received as a partner, a shareholder, or a beneficiary of an estate or trust
You itemize deductions or claim certain tax credits or adjustments to income, or
You owe household employment taxes
File a 1040NR if:
If you are
a resident of the United States, you may be considered a resident alien or nonresident alien for tax purposes:
Green Card Test
Substantial Presence Test (day counting)
NR for 2015 if you are not a resident under these tests
Exemptions from day counting available for certain visa holders--teachers, trainees, students
We will be holding International Student Seminars on various dates in February, March, and April.
File a 1040NR-EZ if:
You are a nonresident alien for tax purposes
You do not claim any dependents, nor can you be claimed as a dependent
Income is less than $100,000, and was from wages, salaries, tips, refunds , scholarship or fellowship grants, and nontaxable interest or dividends
You do not claim any tax credits
Only exclusion you can take is the exclusion for scholarship and fellowship grants, and the only adjustment to income you can take is the student loan interest deduction.
Nonresidents are entitled to take itemized deductions only - they generally are not entitled to take the standard deduction.
If married, you do not take exemption for spouse
Unless excluded by law, gross income includes:
Wages, fees from services, tips
Gains from property, rents, or royalties
Do I Need to File a Michigan Return?
If you file a federal income tax return, also file a Michigan income tax return
You are required to file a MI return (if you had Michigan income) if your federal adjusted gross income is greater than the personal exemption amount on the Michigan income tax return (MI-1040), $4,000
Again, if you are eligible to receive a refund, you must file a Michigan return to obtain it.
Do I Need to File a City of Lansing Tax Return?
If you had Lansing taxable income greater than the total of your personal and dependency exemptions, you must file a tax return even if you did not file a federal tax return.
Even if you do not have income from the city, you generally have to file a city return if you reside in Lansing (exception = nonresident alien taxpayers residing in Lansing).
City returns are due on or before April 30, 2016.
Did you sell any stocks in 2014?
Will be taxed on any profit made (considered a capital gain--subtract basis from sell price); if you sell at a loss, can claim the loss (capital loss).
Did you go to the casino and gamble?
Winnings are taxable and included as income.
Can deduct gambling losses only if you itemize deductions (therefore, must file 1040).
Earned Income Tax Credit
The IRS estimates 1 in 5 people fail to claim their EITC!
You could receive a refund even if you have no tax liability
Must have earned income: paid wages, self-employed wages, farming income, or disability
Must be at least 25 years old by end of 2015, but under 65
Single: AGI is less than $14,820 (no qualifying children)
Married Filing Jointly: AGI is less than $20,330 (no qualifying children)
Amounts are different if you have children.
You cannot qualify for EITC if your filing status is Married Filing Separately
Where Do I Send my Michigan Return?
Refund, Credit, or Zero Return:
MICHIGAN DEPARTMENT OF TREASURY
LANSING, MI 48956
Return with Payment:
MICHIGAN DEPARTMENT OF TREASURY
LANSING MI 48929
All income is subject to tax unless excepted or excluded by the Code
Students should specifically consider the following benefits:
Deducting Student Loan Interest
IRS Publication 17 is a helpful reference tool
VITA site at MSU
Did you receive a state tax refund for tax year 2014?
If a taxpayer received a
state tax refund
for tax year
, that refund may need to be reported as
on the taxpayer's 2015 federal income tax return.
If the taxpayer itemized his or her deductions for 2014 and
listed the state and local taxes paid as an itemized deduction
, the state refund received for that tax year (2014) must be reported as income the following year (2015).
Taxpayer will receive a
listing the state refund amount.
Taxpayer itemized his deductions in 2014 (listing state and local taxes paid as an itemized deduction). He received a state income tax refund for tax year 2014. That state tax refund is taxable income in 2015.
Itemized Deductions vs. Standard Deductions
Single individual/married filing separately: $6,300
Married filing jointly: $12,600
If your expenses paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions are more than the standard deduction, you should
itemize your deductions
Itemizing can reduce your taxes.
There are certain implications with holding a visa
Teachers/trainees - J Visas
Can claim non-resident status for first 2 succeeding years of a 6 year period
A new 6 year period will start again once the first 6 year period is exhausted
Even if you come to US in December, that counts as one whole year
Students - F/M/J/Q Visas
Can claim non-resident status for 5 years (do not need to be consecutive years)
Period does not roll over (once in a lifetime opportunity); however, may extend period if taxpayer can show she does not intent to stay in US permanently
Derivative--applies to spouse and children
US has income tax treaties with over 60 countries
Govern the income tax treatment of income earned by residents of the treaty countries
Purpose: Avoid double taxation, promote international trade and investment, eliminate excess taxes, provide for effective exchange of information, prevent discriminatory treatment
To be eligible for benefits under a tax treaty, an individual must be a resident of the treaty country
Consult your country's income tax treaty to see if you are eligible for certain benefits
Affordable Care Act
If you are a US citizen or non-US citizen living in the United States, you must have qualifying health care coverage, qualify for a health coverage exemption, or make a payment when you file your tax return.
Coverage purchased in the Health Insurance Marketplace
Medicare, most Medicaid coverage, and most health care coverage provided to veterans and active duty service members
Most coverage purchased directly from an insurance company
Check box on return and no further action required.
Qualifying health care coverage =
minimum essential coverage
Exemptions from the coverage requirement
Marketplace will send you notice with your Exemption Certificate Number, use on Form 8965, Health Part I
If you qualify for an IRS exemption, you claim on your tax return Form 8965 Parts II & III
Making a payment on your tax return
If you do not have qualifying coverage or an exemption for each month of the year, you will need to make an individual shared responsibility payment when you file your return for choosing not to purchase coverage.
See IRS website for reporting and calculating the payment amount, and Healthcare.gov for more information.
Premium Tax Credit
If you qualify, you can choose to have advance payments of the tax credit sent to your insurer in order to be used right away to lower your monthly premium costs.
If the amount of advance credit payments you get for the year is less than the tax credit you're due, you’ll get the difference as a refundable credit when you file your tax return.
If your advance payments for the year are more than the amount of your credit, you must repay the excess advance payments with your tax return.
You will receive a Form 1095-A "Health Insurance Marketplace Statement" from the Marketplace
This form will be needed in order to claim the Premium Tax Credit on Form 8962