STUDENT'S TAX TIPS

Today, because of so many changes and revisions to the tax laws, more and more students have to file income tax returns. That's why "J.L. Galang" has assembled some useful tax tips to help you do the best job possible on your income tax return.

As a student, you need to know how to handle certain items that go on your tax return. Keep in mind that this page contains general information. Each individual's situation is different. That's why we suggest you consult with an experienced "J.L. Galang" tax return preparer well in advance of filing your tax return. That way, you will be assured of receiving the best advice for your situation.

COMPLETING FORM W-4 WHEN YOU BEGIN A NEW JOB

You cannot claim exempt status for federal income tax withholding if you can be claimed as the dependent of another person, have any unearned income and expect your total income to be more than $650.

Remember, your social security number must be included on your parents' tax return if you are claimed by them as a dependent. If you do not already have a social security number, get one right away and make sure your parents have a copy of the number.

With the ever-changing tax laws, it's more important than ever to consult with an experienced "J.L. Galang" tax preparer. We're here to help you save your tax dollars.

YOUR PERSONAL OR DEPENDENCY EXEMPTION MAY BE ELIMINATED

If you are claimed or are eligible to be claimed as a dependent on another person's tax return - for example, on your parents' return - you cannot claim a deduction for your own personal exemption.

However, if you are a full-time student who reached age 24 before the end of 1997, your parents will not be able to claim a dependency exemption for you if your gross income is $2,650 or more for 1997.

YOUR STANDARD DEDUCTION MAY BE LIMITED

Although the standard deduction for single individuals has been increased to $4,150 for 1997, the amount dependents can deduct is limited. The rules provide that the standard deduction for a dependent is the greater of $650 or the amount of earned income (wages, income from self-employment and taxable scholarships or fellowships) up to $4,150 reported on your tax return.

In effect, if you are a dependent, you must file a tax return and will have a tax liability if you have any unearned income and your total gross income is more than $650. Unearned income includes interest, dividends, capital gains, income from trust funds and all other taxable income for which no services were performed. If you have no unearned income, you must file and will have a tax liability if your gross income is more than $4,150.

Example: Suppose you earned $1,500 from your part-time job in 1997. You also received $50 interest from your savings account. When you file your tax return, you will report total income of $1,550. You will be entitled to claim a standard deduction of $1,500, the amount of your wages, and you will have a tax liability of $9 on the $50 of interest.

If you didn't work but have unearned income, such as interest on a savings account, your income will be tax-free until it reaches $650. If your unearned income is more than $650 for the year, you will be required to file a tax return and will have a tax liability.

SCHOLARSHIPS AND FELLOWSHIPS

If you receive a scholarship or fellowship, you may have to pay tax on the amount you do not use to pay for tuition and course-related supplies (books, lab fees, etc.).

Example: Suppose you receive a $4,000 scholarship. You spend $1,500 for tuition and $300 for books. You spend the remaining $2,200 for room and board. The $2,200 is taxable. However, because the $2,200 is considered earned income for purposes of determining the standard deduction, it can be completely offset by a $2,200 standard deduction. Thus, no tax would be due if this income were your only income.

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