Your Guide to Taxes in College: Do Students Have to File a Tax Return?

Tax season comes with many questions, especially for college students who may be filing taxes for the first time. One common question these young filers have is: Do I have to file a tax return?

The answer lies in your specific tax situation. Below, we'll answer the question and cover other helpful tax tips. 

Do students have to file a tax return?

Any part-time or full-time student over the age of 18 who's earned at least $12,500 in gross income during the year must file income taxes for that year. You’re exempt from the federal income tax filing requirement if you've earned less than that. 

The one exception to this rule is people 65 years or older seeking higher education. These students only file income taxes if their gross income is $14,250 or more.

A different rule applies for young students, those under 18, who may be claimed as a dependent. In this case, they must file taxes if their income exceeds the standard deduction for that year. For the 2021 tax year, the standard deduction is $1,100 or earned income plus $350, whichever is greater. Keep in mind, these are the income thresholds for filing a federal tax return. You may also need to file a state or other local tax return. 

All types of income go toward your gross income number, including self-employment income and even tips earned at work. This also includes any income earned from a federal work-study program and any scholarships or grants for non-qualified expenses, such as room and board or travel. 

When do you have to file your taxes?

Typically, the tax deadline is April 15 each year. However, if that date falls on a weekend or interferes with a holiday, the Internal Revenue Service (IRS) will move the due date to the next business day.

Due to Washington, D.C.’s observance of Emancipation Day, the IRS pushed the 2022 deadline to April 18.

There are exceptions to this 2022 deadline, though. In Maine and Massachusetts, taxpayers have an extra business day because of Patriots' Day. 

What happens if I’m late filing my taxes?

You immediately begin incurring a failure-to-file penalty when you miss the tax filing deadline. The penalty amount is 5% of your balance owed for each month or partial month your taxes go unfiled. The fine's cap is 25% of your unpaid taxes. 

You’ll also incur a failure-to-pay penalty, which is 0.5% of your unpaid taxes for every month or part of a month your taxes go unpaid. This penalty also has a 25% cap.

The IRS won't hit you with the full brunt of both fines though. Instead, it reduces your failure-to-file penalty by your failure-to-pay penalty amount. For example, if you had $1,000 in taxes and were a month late, you'd have a $50 failure-to-file penalty and a $5 failure-to-pay penalty. The IRS would reduce your failure-to-file penalty to $45 to compensate for the failure-to-pay penalty. 

You can avoid the failure-to-file penalty by filing an extension, which gives you until October 15 to file your return. Keep in mind, this extension only applies to filing your taxes. You still must pay your estimated taxes by the deadline or incur the failure-to-pay penalty. 

Where do I file my taxes?

There are many income tax return filing methods available, ranging from old-fashioned paper to tax-filing software. Let's look at the pros and cons of some methods.

Paper filing 

You can go the old-school route and print tax forms from the internet, pick them up at a local library, grocery store or other establishments, or have the IRS mail them to you by calling 1-800-829-3676. Then, you can use a pen and calculator to tabulate your taxes and fill out the form. 

After completing the form, you then mail it to the IRS for processing. Remember, it must be postmarked by the tax deadline or it's considered late. 

Pros of paper filing

• Safe from online hackers

• You can do it on your schedule

• Free

Cons of paper filing

• Mailing IRS forms exposes you to identity theft via stolen mail

• Time-consuming and possibly confusing

• Increased risk for errors

• Could get lost in the mail

Tax preparer

Companies like H&R Block, Jackson Hewitt, Amscot and others offer professional tax preparation. You take all your tax information to these companies. Then, an experienced, trained tax professional completes and files your federal income tax return for you. 

Many of these companies also offer advance loans on your anticipated income tax refund. This allows you to get your cash quicker, but it often includes a fee. 

Pros of using a tax preparer

• Years of experience and specialized training

• No stress of doing it yourself

• Protected against errors

• Can find tax deductions and credits you were unaware of, such as education expenses, education tax credits and student loan interest deductions

• Advance loans available

Cons of using a tax preparer

• Costs, on average, $146 to $457

• Can be difficult to get an appointment during the tax season rush

Tax software

Tax software, such as TurboTax or Tax Act, is a popular option as it blends the convenience of doing your own tax return on your schedule with the expertise a tax preparer offers. That expertise comes in the form of guidance the software offers along the way. This guidance isn't as specific to your case as a tax professional could be, but it's generally enough to get the job done accurately. 

Some tax software goes above and beyond; if you get stuck, a live professional can help answer your tax questions through video or a phone call. This usually comes at an extra cost, but it's a convenient option to have. Some also offer audit protection, identity theft protection and even refund advance loans.

In most cases, you must pay for tax software, but some are free if you earned under a certain amount of income in that tax year. For example, TurboTax can cost anywhere from $0 to $308.

Pros of using tax software

• Guidance helps you through the process

• All the calculations are done for you

• Some offer tax refund advance loans

• Loads of optional features customize it to fit your needs

• Some offer optional live tax help

Cons of using tax software

• Guidance is generalized

• Still open to errors

• Can be expensive

• Can still take hours to complete your taxes

Filing may be necessary, but you have plenty of options

Even if you're a dependent and a student working just a part-time job, you may still have to file income taxes. If you've earned more than $12,500 in gross income in the last calendar year — or $14,250 if you're over 65 years old — this tax rule applies to you. 

Fortunately, there's no shortage of ways to file your taxes. You can take the old-fashioned route with a paper return, let a tax preparer handle it for you or buy tax software that guides you through the process. 

Whatever option you choose, just be sure you file by the deadline to avoid tax penalties. 

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