If you’re like me, you would be monitoring the mail every single day waiting for the W-2 from your summer employer. The painful memory probably still creeps into your mind, you opened your first summer paycheck to find that the federal government had taken their share from your meager earnings. Thankfully, most students do not have much income, even those among us with cushy summer associate positions, so we are likely to receive most of the money withheld from our payroll check back this time of the year when we file our taxes.
However, as I noted at my other blog, The Taxman Cometh the IRS is experiencing serious delays in updating its computers to accommodate several forms that were revised at the end of the year, one of those forms being the Education Credit Form 8863 that most students will fill out in order to reduce their taxable income and qualify for a tax rebate.
What you should plan for if you are usually timely with your taxes (because you want the cash back) is to not be able to even file your federal returns until February 11th. Then, the IRS is cautioning that any rebate may take several weeks longer than usual to process.
There is good news amidst all this inconvenience, and it involves saving money. If you are in the habit of purchasing TurboTax or some other tax-preparation software each year in order to navigate through the myriad of deductions and exemptions you claim when filing your taxes, do not purchase the software this year. If you earned less than $54,000 in 2007, the IRS will help you file your taxes for free at their website. This should save you the cost of purchasing the software (generally at least $30) plus the fees the software providers charge in order to file your returns electronically (generally at least $20).
The pitfall with this plan is that most states that have income taxes (like New York) do not offer a corresponding free filing for state taxes. I recommend using an inexpensive tax preparation software; Complete Tax is the cheapest I could find ($14.95 with free e-filing).
The lesson in all of this is that students should definitely take advantage of the FreeFile offer by the IRS, but don’t count on your refund coming to your bank account electronically within 10 to 14 days. The delay could extend several weeks or months, depending on when you file your taxes.