I recently got a job as a server. I am not totally sure how much I’ve made so far but I will be surpassing the 6000-7000 income allowance for a student who is claimed as a dependent. If I continue to work, I will also be surpassing the amount required to file taxes. I am working from home to save up for when I’ll be living on my own. I will be my paying for my own rent, utilities, food, and other needs. I wanted to get a better understanding of how this new income will impact my financial aid as well as any advice in regards to taxes.
Some background information:
-I work as a server 3-4 days a week, 4-5 hours a day, and make 16 an hour. I make anywhere from 60-120 in tips a day. *This is income that I believe will impact my FAFSA on its own
-I babysit for 20-25 an hour a few days a week and make about 300 a week. This is not income that I claim but I wanted to see if there would be any benefits from claiming it.
-I am considering also working at Chipotle since if you work for a certain amount of time, they contribute to your tuition. However, this will lead to me needing to fill out taxes sooner.
-My family is considered low income. It’s 4 people (2 adults 2 kids). I am the only one in college. I am listed as a dependent. My expected EFC is $0.
I want to know…if I am making enough to be taxed, is it better to claim myself as an independent rather than a dependent? Is that a possibility and how will being a dependent vs an independent with my income impact my FAFSA? Also any advice in regards to taxes since I am very new to this.
This money is earned income, which means that it should be included when you figure out if you need to file a tax return (and reported if you do need to file a tax return).
Dependent or independent for what? Tax status, or completing a FAFSA?
Asking for advice from anonymous posters on an internet forum is one thing, but you should never rely on such advice. If you don’t feel confident doing your own taxes, always consult with a trusted friend or family member, or find a competent professional with good references.
All the income you list is taxable, but the issue is when is it enough to pay taxes on it and thus require filing. The current standard deduction is about $13000, so you wouldn’t owe any taxes on the income until you reach that total amount in a year. Several of your sources of income are self employment (are your tips included with your wages? they may be. The babysitting is most likely self employment) so it is likely you would need to file the self employment taxes on those funds (and your earnings aren’t added to your parents’ return, you file on your own). It doesn’t matter if your parents claim you as a dependent or you file independently, the standard deduction is the same for your return). Many who aren’t required to file federal taxes because they don’t earn enough do so anyway to get a refund of any amount withheld and it is easier to use the tool to transfer IRS info to the FAFSA if you have filed a return.
FAFSA is different than filing federal taxes. You will most likely be a dependent for FAFSA purposes until you meet one of the reasons for filing independently of your parents - if you support a child, if you join the military, if you get a bachelor degree, if you get married. When you file, there is a section for the parents’ income and assets and one for the student income and assets.
In your case, if your EFC is really $0 based on your parent’s income, then your income may not be considered. If you qualify for automatic $0 based on the parents’ info, I think the student section is ‘grayed out’ and you don’t even enter your income and assets on the FAFSA.
That’s correct. If the parent income is low enough that they qualify for automatic 0 EFC formula, the student income is not considered at all. @Blueberry03 , do you know your parents’ total income?
To be clear, and I’m not saying that you stated it incorrectly, but the standard deduction for someone who can be claimed as a dependent on another taxpayer’s return is calculated differently than the standard deduction for someone who cannot be claimed as a dependent on another taxpayer’s return.