How Do I Prepare My Taxes during Filing Season?

gradstudentfinances_taxwebinar_7Mar2017

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There are several methods by which you can prepare your tax return, but ultimately you are responsible for its accuracy and completeness. It is worthwhile to learn the basics of how taxes are calculated when your return is simple so that you can understand the system once your personal returns become more complicated, even if you no longer prepare them yourself.

1) Prepare your tax return manually.

This method may be quite quick and easy for simple tax situations or prohibitively difficult for complex ones. (The majority of graduate students do have simple tax situations because they take the standard deduction.) The advantage of this method is that you have total control over how your return is filled out. The downside is that you don’t know what you don’t know, so you may inadvertently make a mistake.

Related: Why Don’t More People Do Their Own Taxes?

2) Prepare your tax return using software.

This is the most popular method for graduate students. However, the free versions of tax software often have difficulty understanding the way graduate students are paid. You may not easily find how to enter fellowship income or the software may try to determine that you are self-employed, which is not typical for grad students receiving fellowship income from their universities or funding agencies. The advantage of this method is that it is likely to catch some unusual situations so you can perhaps be more confident that you didn’t miss any deductions or credits you may be eligible for. The disadvantage is that you don’t directly prepare your return and you have problems communicating with the software if you have fellowship pay.

Related: Our Experience Using Tax Software

3) Pay a tax preparer to do your return.

This is likely only the best option for people with very complex returns who are convinced the preparer properly understands how to report grad student income, which many do not. It is still your responsibility to make sure that your return is correct so you should double-check at least where your income has been reported.

4) Give your return to your parent to fill out.

Many graduate students do rely on their parents to fill out their tax returns. The advantage to this method is that you don’t have to spend the time to prepare the return yourself, even though you should still check it for accuracy. The disadvantage is that the parent may have little to no knowledge of the specific tax needs of graduate students and are less likely than professional tax preparers to be aware of the differences.

No matter which preparation method you choose, you need to make sure that the ultimate result is correct. Graduate student tax returns can potentially be very simple but are also easy to fill out incorrectly when non-compensatory pay is involved. In that case, it is only a matter of making sure that your income is reported in the correct line on your tax return.

We at Grad Student Finances are not tax professionals, and none of the content in this section should be taken as advice for tax purposes.

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