<p>Hey parents! my dad passed away recently, and he was the one who did my part of the taxes. So, I am pretty loss on what to do, and the tax accountant is pretty clueless on this part.</p>
<p>I have a full ride scholarship that covers tuition and fees, books, monthly stipend, mcat course stipend, and study abroad money. I think tuition, fees, and books are tax free, but the rest need to be taxed on. Does anyone know roughly how much percentage the tax on this stuff is? the tax accountant isnt sure, but thinks i will need to pay about $3600, which seems a lot to me.</p>
<p>If your tax accountant is clueless, you need a new tax accountant.</p>
<p>You are correct that educational expenses (tutition, books, etc) are not taxable but monies earned from TAing, scholarships that cover living expenses, etc. are taxable.</p>
<p>The IRS has pulications on what is taxable and what is not (I believe it is publication 970). Anyways, the best way to figure it all out is use something like TurboTax. It asks you for info, you enter it, and it figures your taxes. No need for a tax accountant and probably a lot cheaper…</p>
<p>I wouldn’t recommend that you try to do this yourself, even with TurboTax. I’m a parent and have been doing our taxes for more years than you’ve been alive, but the whole scholarship/educational credits and deductions thing threw me for a loop. This is not for beginners. Take it into HR Block or someplace; the small fee may save you alot of grief down the road. </p>
<p>$3600 seems a little steep to me too, but it’s impossible to tell until the forms are filled out. Please go see someone who knows what they’re doing.</p>
<p>Yes. You are correct that the amount over qualified tuition, books and supplies is taxable. How much depends on many things. Are you claimed by your mother on her return? If so, and if you have no other income, anything over $5,700 will be taxable at a rate of about 10%. Find it hard to believe that would be $3,600. If you can claim yourself, only the amount over $9,350 will be taxable. If you have other income it depends on whether it’s earned or unearned. I disagree that you shouldn’t use turbo tax. Go to: [Internal</a> Revenue Service](<a href=“http://www.irs.gov%5DInternal”>http://www.irs.gov) and use the “freefile” option. Free to fill out and file Federal. If they charge for your state, print it out and mail it in.</p>
<p>If you feel you can’t do it, try a firm like H&R Block which is reasonable. This isn’t that hard. Your accountant needs to be fired.</p>
<p>TurboTax will accurately calculate and produce a return based on what the user inputs. I’m just concerned that a newbie taxpayer may not know exactly what to input and may therefore file an inaccurate return. Higher-education tax matters can get complicated. The OP can use 2010 as a template in future years, but for the first time out, he/she would be well-advised to use a professional. JMHO</p>
Is your Mom still in the picture (will you be a dependent on her return)?
Perhaps the accountant is thinking self employment income (1099 Misc form) and this increases the possibible income</p>
<p>You may or may not need a new tax accountant. Expecting a precise answer based on a possibly confused phone call / email on April 2 is not realistic. Get the forms you have received in the hands of the tax preparer and then talk to them. Maybe, just for this year, sit down with them for a short discussion. At that point decide whether you need a new tax professional.</p>
<p>How many readers here would agree with me if I said:
“I called my mechanic and told him my car was going “whumpa whumpa whumpa” and he couldn’t give me an answer…guess its time for a new mechanic.”</p>
<p>Same situation here. I often compare tax work to a car mechanic. I used to maintain my own vehicles and I probably still could. i am not good at it. I don’t enjoy it. If I make a mistake it could very well lead to future unpleasant complications. Clearly, its worth a few bucks to have a pro take care of my vehicles.</p>
<p>I think it depends on how much time you’re willing to devote to taxes. I got bad advice about taxable scholarship income from my tax preparer so I did the research myself and filled out a more accurate return than one that would have been done by my accountant. Once you know the information to input, it’s not difficult.</p>
<p>What I would not do, is hand my stuff to the tax preparer and take what was prepared without understanding this yearly ritual. When I have payed a tax professional I do my own taxes first and have him/her explain why the numbers are different.</p>
<p>Hmm, let’s see. Dad used to do the taxes, and the family accountant is begging off … but estimates a tax liability than none of us experienced parents can fathom. I guess I’m with those who say “find another accountant … and NOW.” If the return is simple the accountant’s fee will be small. If the return is complex, at least an expert will have given advice. However the return turns out, OP will have a template for next year’s return. Money well spent I’d say.</p>
<p>I agree that using TurboTax is not necessarily going to help if you don’t know what you are doing. I work for a tax prep company and we amend returns originally done on Turbotax more than another other prep service.</p>
<p>If you go to a tax prep place, ask for someone experienced with taxing scholarships. Look for an enrolled agent among tax preparers, or look for an accountant that specializes in taxes. Accountants don’t have to tax required tax update courses, since that is only one part of a business.</p>
<p>The amount that is not covering tuition and fees will be added to your income (along with wages, interest, etc). You will then take the standard deduction ($5700). If you are being claimed by your parent you will not get the individual exemption ($3650). Once you have this calculated you will use a tax table to determine how much the taxes will be.</p>
<p>Again, assuming the accountant doesn’t know what they are talking about makes no sense.</p>
<p>Dad died. Its not so simple:
Distributions from an inherited IRA?
Investment income?
Is there an administrative estate and have distributions been made?
There could be business income, pass through entity income, trusts etc.</p>
<p>Everyone assumes the estimate of tax liability comes from the school issues only. You have no idea of what is happening with Dad’s estate or the complexities involved in the family tax situation. Advising a young person to jump ship with partial information is not well considered. There may be multiple entities with complex relationships. Turbo tax…yeah, great advice. </p>
<p>I am not saying the accountant is competent. I am saying a determination cannnot be made from the information provided by the OP.</p>
<p>for my part, all I have is my scholarship stipends, small dividends from a stock (like $20), and savings account.</p>
<p>my mom is claiming me as a dependent. part of the problem is that my school doesnt generate 1098-T for people who get more scholarship money than tuition costs. So, what my school told me to do was give her how much I received from the school in scholarship money minus tuition. She took that number and took 15% tax from that to get $3600. If there is a standard deduction of $5700, then a tax of $3600 clearly isnt right.</p>
<p>Check again with your school regarding the 1098. My son’s school has it on the student’s university internet account so it can be printed at home. I would guess they are required to file these with the IRS so they woul be available somewhere.</p>
<p>My son’s situation is much like yours. We claim him as a dependent and he makes very little above the scholarships he receives, which cover the entire cost of his tuition, room and board, books, etc. He ended up paying roughly $500 in federal and $200 in state taxes thuis year. Be careful when looking at the 1098. The amount in the box “Amounts billed for qualified tuition and related expenses” may not be your total qualified expenses (eg. supplies needed for an art class that are required to take the course would be qualified but would not be included by the school on the 1098 if you had to purchase them yourself). Be sure to review Publication 970 for all qualifying expenses.</p>
<p>When I was an accounting student we provided free tax preparation to students through Beta Alpha Psi, an accounting fraternity. We were very well supervised. You could check with the business department to see if they could be of assistance.</p>
<p>Also this year the tax due date is April 18th, not the 15th as normal (due to a holiday in D.C.)</p>
<p>I’m not sure if you’re trying to do your taxes or just get an estimate of what you owe, but I am in a similar situation and just did my taxes for the first time this year. You should be able to use a form 1040EZ. If you go to irs.gov, you can link to different sites where you can file your taxes online or you can just fill out the form to see how much you’ll have to pay. As someone mentioned, IRS publication 970, which you can read online, explains all the rules about taxable scholarships. Basically any amount above what you paid for tuition, fees, and books is taxable. Make sure you save all your receipts for books, etc. </p>
<p>When you fill out the 1040EZ (or other tax form), you have to add your taxable scholarship amount together with your other income (from wages, interest, etc.) and put it on line 1 where it says “wages, salaries, and tips.” Publication 970 says “If you file form 1040EZ, include the taxable amount [of scholarships] in the total on line 1. If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount in the space to the left of line 1.” In other words, put the letters “SCH” with the amount of taxable scholarships to the left and then the TOTAL income (your interest, wages, etc. PLUS your taxable scholarship amount on line 1). I used a paper form and mailed it because I could not do this in an online program and I had wages to be included in the total on line 1. You can print out a paper form 1040EZ and read the instructions online. If you just follow the instructions, it is pretty easy. If someone else CAN claim you as a dependent (even if they don’t) your deduction will be $5700. The form will lead you through this, but basically you’ll end up subtracting $5700. from your income on line 1 and get your taxable income. Then you’ll look that number up on a chart and see how much tax you owe. If you’ve paid any tax, you’ll subtract that and you’ll get how much you owe.</p>
<p>One important thing I found out is that it only matters when things were paid, not when they were billed. My 1098-T showed my tuition for fall 2010 and spring 2011 in the amounts billed in 2010 box, but I found out the spring tuition was not paid until 2011. This can get confusing because the money is coming from the school and going back to the school. So go by the year when things were paid (for 2010 tax return only include amount paid in 2010).</p>
<p>^^^^Actually bluehorse, it’s best to separate the wages from a job and the scholarship money on a form 1040 so that the schools subtract that money when calculating financial aid.</p>
<p>thanks for the detailed response bluehorse.</p>
<p>also does anyone know anything about study abroad? I got $9000 to study abroad last summer, and I paid $8400 to a study abroad program, which included tuition and room and board. Am I allowed to deduct the tuition part of it out (I dont know the exact cost of tuition)?</p>
<p>GTalum: No, actually the instructions in IRS publication 970 for form 1040 say to do the same thing. “If you file form 1040, include the taxable amount [of scholarships] in the total on line 7. If the taxable amount was not reported on Form W-2, also enter “SCH” and the taxable amount on the dotted line next to line 7.” On form 1040, line 7 is the line for wages, salaries, tips, etc.</p>
<p>It is separated in that the scholarship amount is written to the left and then added into the total. This looks like the only way to do it on any IRS form. That’s why I decided to mail in a paper form instead of doing it online, so I could show the amount for scholarships separate from the total income that included wages.</p>