Money Talks: Taxes

Posted by Joe Crosby

3/20/15 9:56 AM

Money Talks are quick hitting posts on a topic that will help your students manage their loans and finances. With links, tools, and visuals, you can easily digest and regurgitate the info so your students can one day fly from your nest financially healthy and strong.  

Previous Money Talks | Credit Scores | Staying on Budget  | Dropping Out & Student Loan Repayment Options | Forecasting the Future


 

preparedfortaxdayTax day is less than a month away. As you are likely very aware, college students cannot be pinned into one tax classification. Some are dependents, some are raising their own dependents, and some don't know what they are.

Your job is certainly not to offer tax advice, but there are a few items of good guidance you can share with your students to help them see that tax management and student loan management are an early relationship that leads to financial management.

Here are 4 common questions:

1. To file or not to file? If you have traditional students who can still be claimed as a dependent, they may not be required to file an income tax return if they earned less than $6200 in 2014. However, if they had taxes withheld, they should file. They likely can file for free @ IRS.gov=

2. What's the difference in net pay vs gross salary? We want students to start thinking about how their current borrowing will fit in with their income after they graduate. But it's hard to start budgeting if they have no idea what a paycheck for an entry level job will look like after taxes. This calculator allows them to see what their net paycheck could look like under different circumstances. It's a helpful tool when teaching budgeting for college students. 

3. What to do with the refund? Okay so you'll probably never be asked that (because most students have plans for that cash), but you could be proactive to nudge them toward more prudent investing. Most financial experts advise taking a windfall and:

1. Paying off high interest credit
2. Building an emergency fund so there is no need to rely on credit cards in the future

If both those things are covered, see if they can buy next terms book at a reduced price now, pay down accruing interest, or get a discount on housing with pre-payment.   

4. What do I do when taxes are finished? Get that information into the FAFSA. Fastest way to make this happen is with the IRS DRT. A visual . . . 

transfer-tax-info-to-fafsa