IRS troubles

Bigbluefoot · March 2011

Nevermind, it actually looks like I was a bit too hasty making this thread. Turns out, you aren't supposed to claim federal grants on your income. Who'da'thunk? Well, there goes $5,000 from my income, so I should hopefully be back to the point of them owing me $200, rather than me owing them $438.

Esh · March 2011

Bigbluefoot wrote: »

Alright, I really hate to ask something like this, but this is really freaking me out.

I'm a student, I'm in my sophomore year, more or less. Prior to this year, I have not had any difficulties, I've had a very low refund on my taxes, though. Like, I pay a family friend to do my taxes for $25, and my refund doesn't even cover that. Well, this year she figured them, and hey, I got 50 bucks from the state, and I was getting 200 bucks from the feds. Well, I've been figuring that the check would've come about a month or so ago, because I filed my taxes in the first week of February.

Yesterday, I got a letter from the IRS stating that I owe them $438. They said I paid in $9, from the $447 that was my total, and so yeah, had to pay them by the 14th of April. I have already talked to the family friend, and someone in the financial department of my college, and they both say I need to dispute it, which I am. The woman from the college says that it may be that they are taxing me on the money that did not go to paying for my classes. Technically, I spent about $300 of my Pell on classes, due to a waiver I have, but I also had to buy a laptop, plus food, and general living expenses.

Normally, I wouldn't freak out, but $438 is more than I have ever had to pay to taxes in the 4 years I have been working. And I mean total. Last year I worked at one place of business, about 12 hours a week, all year. That's about $4,400 there, plus ~$5,000 in Pell grant, seeing as the waiver is from my mom working at the college, not some government thing. I don't know how this is possible.

EDIT:
I actually spent $300 on classes each semester. That is not including books, which was about another $400 each semester. So, total for class, $1,200. Also, I did not buy a laptop, I bought a desktop, I mixed last year up with the year before.

Plus, just today I got a call from the person I'm going to be leasing an apartment from in August, where my friends currently live. He says that I should have already given him my security deposit at this point, which is 4 weeks earlier than my friends had to do last year, so I am freaking out even more, because this is wracking up to $870, and I have about $700. At least this week is payday...

Mostly I'm venting, but some help, like which channels I should be going through, would be so totally awesome. You guys have helped me out a fair bit, even with stuff that wasn't my own call for help. Thanks a lot.

What exactly are you asking for help with? You shouldn't be getting taxed on those student loans at all. I never have and I get quite a bit more than I need for my tuition. Did you call the IRS yet? Because that should be your first step. They can tell you exactly why they're charging you. Pay your security deposit now, it's not like the IRS is going to freak out if you don't pay them that $400 this second.

spool32 · March 2011

So what did your return say, when you filed it? Also, is your friend's signature ON the return? If you had someone else prepare your taxes, they're supposed to also sign the form. In other words, your friend is also involved with this, hopefully. Otherwise, "my friend did this and the mistake isn't my fault" will be ignored by the IRS when you go to dispute the result.

Anyhow, read these PDFs about the IRS's appeals process and make sure you submit the forms fast.

It sort of sounds to me like you didn't withhold any tax from your paycheck over the last year - if you only paid $9 for a year of work, that sounds a lot like you messed up your W2 and no tax was withheld.

If that's the case, you may be on the hook for it...

Edit: from the IRS guide on Taxable Income for Students

Pell Grants, Supplemental Educational Opportunity Grants, and Grants to States for State Student Incentives. These grants are nontaxable scholarships to the extent used for tuition and course-related expenses during the grant period

If you spent only $1300 on tuition and course-related expenses, then you're on the hook for taxes on the $4400 + another $3700 or so in grant money you didn't spend. That still shouldn't be much more than the standard deduction for a single adult with no dependents.

spool32 · March 2011

I see the OP has been edited, but I believe his new statement is in error. From the link to taxable student income I posted above, you owe tax on any portion of the Pell grant that you did NOT use for school expenses, UNLESS you have a reduced tuition because your parent is employed by the university (which you do) and in that case you can reduce the taxable portion of your Pell grant by the amount you would have needed to pay in tuition if you did not receive the tuition reduction.

Basically, if your tuition before the reduction is more than $5000, you're in the clear. If not, you need to take a second look at this.

Bigbluefoot · March 2011

Alright, I have now talked to the IRS, and there seems to be a lot wrong with my forms. Like, say, that there was form along the lines of home equity loans. Which, at 20 years old, is not something I have done, or plan to do for a number of years in the future. They are maintaining that I owe the money, which is not the case. The woman I talked to basically explained that it was the "Make Your Work Pay" credit that caused this discrepancy. The gist of this one is that she says that they automatically applied this credit to me, and since I am not eligible for it, I have to pay the difference.

And yes, prior to my reduction, my tuition would be quite a bit higher than $5,000. I take 4 classes a quarter, which ends up being around $500 a class. So, there's $4,000, plus my books, which I actually got for slightly less, due to me working in the bookstore. Then there were some extra fees with my classes. Online course fees, lab fees, things of that nature.

The thing that truly amazes me is the fact that my two friends, who I will be moving in with later this year, have both gotten their refunds. One worked at the campus library, all year, and got more hours than I did. He got back $400. My other friend, who worked one month at a factory, got back $200. He worked a total of 120 hours. That is a fifth of my year, and he made slightly more than me, so let's go with a fourth of my year. His tax difference was $600. That seems quite off to me.

But, I am filing a 1040X amendment, and I will also be calling the IRS again tomorrow, and will hopefully get a different tax specialist. That would pretty much get me a different amount, but also the woman I was on the phone with did not remove my grants, she left them on there, so the money amount did not change, even though she verified that they were all non-taxable, including my reduction, which was not a government thing in the first place, so she really didn't even have to look at. She faxed me what she ended up with, which changed exactly zero. So, yeah, situation not fixed, and I will have to look into this again tomorrow, I just don't have the time left in today to make the necessary calls.

EDIT:

I am also still being claimed, which is what makes it so that I can get my tuition waiver. The school will not give it to anyone that is not claimed by the employee.

Aurora Borealis · March 2011

I am also still being claimed, which is what makes it so that I can get my tuition waiver. The school will not give it to anyone that is not claimed by the employee.

This is the thing that makes you owe more money in taxes than your friends. Stop comparing their taxes to yours, you'll just stress yourself out more and resent them for no reason.

Bigbluefoot · March 2011

My friends are also claimed by their parents, so this is still a valid point.

EDIT:
So, after doing the amendment form, by all appearances, they owe me $9. So yeah, we'll have to see if they challenge that.

EDIT EDIT:
My freak-out thing was not that my friends were getting more money than me, that's because they paid in a lot more than me. My problem is that they are both students, thus they get pretty much all of their tax money, rather than having to pay 100% of it. Which is obviously what I am now, so, it doesn't make any sense that they are asking for this much money.

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