<p>I have a W-4 related question for S starting Federal Work study program in 2014.</p>
<p>1) Is FWS taxable income if its only 3k per yr.
2) He will be making 1.5k in 2014 so can he put EXEMPT from witholding on Item 7, Thats his first paying job and he never worked before.
3) Can Parents still claim him as dependent on their Tax return since he still live with them for more then 6 month and they still paying for his Tuition and misc stuff..
4) Will School Deduct Tax from his paycheck since its only FWS..</p>
<p>I am not a tax expert, But this is my recollection from my daughter’s college years.</p>
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Is FWS taxable income if its only 3k per yr.
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<p>If this is his only income, he would likely get a full refund on any federal taxes withheld from his pay.</p>
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<p>I believe my daughter put exempt on her w-4. She had no withholding taken out.</p>
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<p>Yes. You can still claim him on your taxes.</p>
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<p>I think my daughter elected not to have federal withholding taken out of her WS pay when the amount was below the threshold for a actually owing taxes.</p>
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<li><p>Yes, it’s taxable income but with the low rate of earnings it’s unlikely to incur federal and state withholding. If it’s his only income withholding is unlikely to be necessary.</p></li>
<li><p>Yes, since he’s never owed tax in previous year he can claim exempt although with 1. there probably wouldn’t be withholding anyway.</p></li>
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<li>Yes, you probably can still claim him. Being away from school is a temporary absence for education so most likely you can consider he’s lived with you for 12 months. Presumably you are providing over 50% of his support. Any scholarships/grant he may be receiving are not considered support the student is providing themselves, it is considered coming from a 3rd party.</li>
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<p>See the qualifying child dependency tests starting on page 13 of IRS Pub 501 and look at the support worksheet on page 16.</p>
<p>thumper1 and annoyingdad Thanks for your Detail insight in these Tax related questions, it really helps me to make sure Student and Parents follow the Law and rules as prescribed by IRS…</p>
<p>He is in UM so no FL state Tax I guess.
He is employed by the School so no SS or Medicare Tax either…
He is also recipient of Merit Scholarship and School Grant ( Totaling Full Tution plus more) not sure how will that affect his Tax return for Yr 2014 and 2015…</p>
<p>Any advise on 2014 Tax returns for Parents like any Tax credit we can claim since we also paying some of his Education Expenses with Parent Plus loans…</p>
<p>Ok, that he is getting full tuition plus more changes a lot. You need to look at chapter 1 of IRS Pub 970 about taxable scholarships/grants. Any amounts over tuition, mandatory fees and required books and supplies are taxable income to the student. If his earnings plus taxable scholarship/grant amounts are enough to have to file a return he will have to do so. Coordinating that with the tax credits is complicated. Take a stab at Pub 970 chapters 1 and 2.</p>
<p>If merit scholarships and school grants total more than the cost of tuition, it sounds like your son will have taxable income besides what he earns from work study. If this is the case, depending on the excess scholarships and grants above the cost of tuition, he will want to be very careful if claiming exemption from withholding on the W-4.</p>
<p>Read IRS Pub. 970 for information on the American Opportunity Tax Credit. However, if all of your son’s qualified expenses are being covered by scholarships and grants, you may have a difficult time qualifying for the credit. (You could push some of the scholarships and grants to taxable income, but this raises other concerns.)</p>
<p>He is getting 1K in extra School Grant and 5.5k in stafford loan for 1 Full yr. Plus 3k from WS.
Full tuition is 100% covered by scholarship and school grant.
The rest in difference from COA is being paid by Parents</p>
<p>The Direct Loan does not count. It’s a loan and will not be considered income. </p>
<p>Any scholarships or grants (not work study or loans) that exceed qualified educational expenses (tuition, fees, book) are considered taxable income for your son. BUT he will not be receiving ALL of his award before the end of 2014, right? Is it possible that part of it will be for the second term beginning in winter?</p>
<p>Anyway…you need to keep track of his expenditures for things like books and necessary school related things (lab fees for example). These are also qualified educational expenses.</p>
<p>If he only has an additional $1000 above his tuition costs, he probably won’t have a tax impact once you add in books, college fees, etc.</p>
<p>The amount I mention above is for Fall 2014 and Spring 2015 so it falls in 2 different yrs.
Are Housing, boarding fall under qualified educational expenses or just the Tuition, Books, misc fees</p>
<p>Maybe two different years, maybe not. You need to pay attention to whether the schools bills expenses and credits scholarships/grants in December or January. If it happens in December then it will be for tax year 2014. You really need to either understand the relevant Pub 970 chapters or consult a tax professional familiar with education matters. Even if you use tax software, the relevant education topics can be confusing and understanding the regulations is really necessary to use the software properly for education matters. Are you using any 529 funds for R&B? If so that’s another complication that needs to be coordinated.</p>
<p>The actual disbursements dates for spring 2015 are 1/5/15 so that has to be yr 2015.
I will read pb970 in details in next few days to get an idea of changes i might be running into for 2014 Tax yr.
I dont have any 529 Funds…</p>
<p>None of the loans are considered “income” for tax purposes. They are considered payments—you paid by borrowing. </p>
<p>Basically, what your son received in terms of grants in 2014 minus the tution, fees, books and other allowable expenses are considered unearned income for your son. What he earned in work study in 2014 is to be reported too–he’ll get the paperwork for that, as one gets in any job. Whatever was borrowed is considered what you paid, so you will likely be able to take the tax credit. YOu do need to read the Pub 970 to get the specifics and may need assistance from a tax expert on these things. </p>
<p>What’s great about work study and any proceeds the school gives to the student after their charges are paid, is that they are not included in the FAFSA requested assets for the student. A student gets hit 20% straight up to the EFC of any assets he has the day FAFSA is filed. But if those assets are proceeds of fin aid, grant, work study, they are not so included. </p>
<p>Taxable scholarships/grants are considered earned income for the purposes of having to file and for the standard deduction. However, they are considered unearned income for the purpose of the kiddie tax, form 8615. </p>
<p>If, as OP reported above, scholarships and grants exceed the cost of tuition, then most if not all of the loan proceeds will be going to cover expenses that are not considered qualified under the AOTC.</p>
<p>Parent is paying something with PLUS from what is said. How the split is made in terms of getting the credit, reporting for taxes, for the best advantage has to be played with from what I have seen in a number of scenarios. Unless a scholarship or grant specifies that it is for tuition only, it sometimes is to the family’s advantage to not offset the award by the tuition and allow it to be part of the student’s unearned income since there is allowance for that before it starts to be taxable and the AOTC might be more valuable overall to take as a credit by the parents. That’s why some tax professional’s help might be valuable here. It’s not something we can advise or should be advising. </p>
<p>I believe I mistakenly called scholarships unearned income when the IRS classifies it as earned. Taxes start for a dependent at certain level of earned income. (and unearned income also has an allowance). So it’s not so simple as to what to do when one has grants in the picture, student earnings, yet parents and students paying some costs and AOTC in the picture. </p>
<p>For purposes of determining whether or not there is any liability under the “kiddie tax,” the IRS considers scholarships and grants to be unearned income.</p>
<p>As I have stated, a tax professional should be consulted for this as there seems to be some controversy about this. Though Form 8614 (?) does define it as unearned income , there are a number of discussions on how this can/is treated. Not something I’m going to argue or discuss further, because I am NOT a tax expert, Those who are and know for sure, can say so, but I’ve really given more information that may not be exactly correct on the tax front or outright wrong as it is just taking a quick google on the subject. Back a few years ago, I know that scholarships were treated as earned income when it came to tax liability, but how it’s handled today and under what circumstances, I don’t know as it has not been something I’ve personally questioned with my accountant or the IRS.</p>
<p>It throws another complication into whether a family makes out better having the student treat some additional amount of the scholarships/grants as taxable so the parents can claim the AOTC. Depends on the tax bracket of the parents.</p>
<p>Considering the tax software companies have incorporated this treatment into their software convinces me taxable scholarships/grants are unearned income for the kiddie tax.</p>