Feb
I am a graduate student and received some stipend of $1000 from Americorp to help pay towards my tution. I got a statement this year for it and gave it to my parent since I’m still considered as a “dependent” to file tax.
The accountant came back with a form and a slip for me to mail to U.S Treasury for $11 and no money back. I don't comprehend why I have to pay them money for filing only $1000 income while other people like my parents get some money back? What's up with that?
P.S the accountant gave me the standard deduction for dependent as a way of explaination and I am still not getting it.
Answer:
Sounds like the $1000 is from investment income which you’re required to file and pay taxes on any amount over $800 as a dependent.
You also probably didn't pay any taxes on it so why would you expect to get money back?
The “standard deduction” he’s talking of is $900. So you had to pay taxes on $100 on investment income.
Technically, your parents could have just added the $1000 to their return but they probably didn't want to increase their income and incur higher taxes when they probably earn more. So, they’d you on your own return that way the liability would be limited to $11.
The accountant knew what he was doing if this is in fact investment income.
Answer:
Sounds like you need a new “accountant” if that stipend was your only income. As long as you used it for qualified educational expenses it's not taxable income. And if you didn't use it for qualified educational expenses it's not enough to trigger a tax liability. There is no need for you to file a return or pay any taxes.
Answer:
Did you receive any form from Americorp? If yes, what’s in various boxes on the form?
Why did you get the stipend? Is it for your service, or scholarship or grant?
Answer:
Perhaps you need to speak with another accountant
Answer:
you got the standard deduction, but probably didn't get credit for your exemption because you're a dependent on your parent's return so they get to claim you. If that's the case…maybe your parents will pay your $11 to the IRS beings they claimed your exemption. So, when you don't claim yourself and you don't pay in enough taxes from wages, you don't get a refund because you don't have that exemption cushion to put you in the black instead of the red. For example:
(made up figures)
Income:$5000 and you paid $400 in taxes from your wages.
IRS gives you $3000 Standard deduction and $1000 exemption
You’re left with $1000 taxable income. Let's state you look up $1000 dollars on the tax table and it says your tax owing is $200 you would then get a $200 refund. BUT let's say you didn't get the $1000 exemption because your parents claimed you….then your taxable amount is $2000. When you look at the tax table you owe more because you taxable amount is more. Let's say $2000 on the table is now $411. Beings you only paid in $400, you then would owe the IRS $11.
I hope this made sense! It's easier to explain when the paperwork is there to go over with you!!