Brace yourself... a few questions...

[Karl]

I am filing a tax return on my own for the first time. When I was younger a relative would do it for me, and then I was unemployed for a while, and then I didn't make enough to have to file, but last year I made enough that it would make sense to file... so now, at the young age of 25, I am trying to figure this stuff out... The only problem is, I have no bloody idea how to do this sort of thing, and so I am just using TaxACT online. The only problem is, I don't think it did my taxes correctly, and so I am afraid to submit them.

[1] My parents claimed me as a dependent for 2007, but there was no where to designate that in my return. I filed as single.

[2] It told me, "An Earned Income Credit of $220 has been included in your return." but I am a dependent, and (unless I misread) the IRS website said that I don't get that if I am a dependent. This credit didn't change the refund amount it said I was owed though, so I'm not sure if it actually did anything (before I reached that screen, it told me I had the same refund amount.)

[3] Then, it has given me this as my summary:

Income: $2,867
Adjustments: $0
Adjusted Gross Income: $2,867
Deductions: $5,350
Exemptions: $3,400
Taxable Income: $0
Tax: $0
Alternative Minimum Tax: $0
Credits: $0
Other Taxes: $0
Payments: $366
Underpayment Penalty: $0
Refund: $366

I had "Federal income tax withheld: 145.50" and "State income tax: 29.21" on my W-2, and I entered it as this, and so how on Earth could my refund be $366???? How could the deduction be so much bigger than my income? I guess I don't even understand what it is...

[4] Where am I supposed to designate myself as a dependent? Am I supposed to designate myself as a dependent? I was 24 that year, and turned 25 like 2 days before the end of it. And I read somewhere that you can't claim someone as a dependent if they are 24. But my parents had my uncle, who is an actual accountant with a firm and everything (or whatever you call it), prepare their taxes so I don't think he would make such a simple mistake. I still live at home and everything, and go to school full time, and they paid for my tuition.

[5] I got a student loan and received a Pell Grant for that year. Does that count as a scholarship, because I didn't list it as one and maybe that is a mistake? It doesn't appear anywhere on my W-2 I don't think. And it's shocking that the government would give me so much money, but then it wouldn't have any relevance to my taxes.

[6] It said something about filing a state return too... I thought that we only had to do one tax thing, and that was to the federal government. Am I confused?

[solomon]

Go to a tax professional - in person.

[Karl]

What do I need to bring, how much does it cost, and how do I find a good one?

EDIT: I just found a tab that lets me say I'm a dependent - somehow it skipped it, but on the review screen it let me review it and it cut the refund to $146 which seems much more believable to me...

[solomon]

What do I need to bring, how much does it cost, and how do I find a good one?

With your return you don't need a good tax preparer - go to the most convenient place. Or, go to the IRS VITA program at a local library and get it done for nothing.

[solomon]

EDIT: I just found a tab that lets me say I'm a dependent - somehow it skipped it, but on the review screen it let me review it and it cut the refund to $146 which seems much more believable to me...

Congratulations.

[JoshinNC]

I disagree Solomon

With your return you don't need a good tax preparer - go to the most convenient place. Or, go to the IRS VITA program at a local library and get it done for nothing.

The TP should go to a reputable EA or CPA now to begin a working relationship. He may not need the expertise of one of us now, but will one day. By beginning a relationship now the TP will become more educated with a good professional and will have confidence (at least somewhat) that his return is accurately prepared. Better yet, if he is still his parent's dependent he should go to their accountant and ask for free preparation. I do free preparation for dependent's of my clients in an effort to get them to continue to use our firm as they progress through life.

[Koss]

Some Answers

[1] My parents claimed me as a dependent for 2007, but there was no where to designate that in my return. I filed as single.

Your filing status is single, regardless of whether you are claimed as a dependent by someone else. Early in the preliminary interview, there IS a question that asks you if you can be claimed as a dependent on someone else's return. Somehow you missed it. If you fail to answer the question, the program will presume that the answer is no.

[2] It told me, "An Earned Income Credit of $220 has been included in your return." but I am a dependent, and (unless I misread) the IRS website said that I don't get that if I am a dependent. This credit didn't change the refund amount it said I was owed though, so I'm not sure if it actually did anything (before I reached that screen, it told me I had the same refund amount.)

You are correct that you cannot claim the Earned Income Credit if you are a dependent of someone else. The refund amount did not change because the program had calculated your refund, including EIC, before that particular screen appeared.

[3] Then, it has given me this as my summary:

Income: $2,867
Adjustments: $0
Adjusted Gross Income: $2,867
Deductions: $5,350
Exemptions: $3,400
Taxable Income: $0
Tax: $0
Alternative Minimum Tax: $0
Credits: $0
Other Taxes: $0
Payments: $366
Underpayment Penalty: $0
Refund: $366

I had "Federal income tax withheld: 145.50" and "State income tax: 29.21" on my W-2, and I entered it as this, and so how on Earth could my refund be $366???? How could the deduction be so much bigger than my income? I guess I don't even understand what it is...

Your refund is $366 because you are getting a complete refund of the $146 withheld, plus the Earned Income Credit of $220 (which you are not really entitled to).

[4] Where am I supposed to designate myself as a dependent? Am I supposed to designate myself as a dependent? I was 24 that year, and turned 25 like 2 days before the end of it. And I read somewhere that you can't claim someone as a dependent if they are 24. But my parents had my uncle, who is an actual accountant with a firm and everything (or whatever you call it), prepare their taxes so I don't think he would make such a simple mistake. I still live at home and everything, and go to school full time, and they paid for my tuition.

There are two types of dependents: Qualifying Child and Qualifying Relative. To be a Qualifying Child, one of the requirements is that the child must be under age 19, or under age 24 and a full time student for at least five months of the year. The tax law only looks at your age on the last day of the year, so you are not a qualifying child. However, you can be a qualifying relative if:
(i) you lived with your parents all year;
(ii) they supported you, and
(iii) your gross income for 2007 was under $3400.

Sounds like you meet the criteria to be a qualifying relative of your parents. So your uncle got it right. You are in fact a dependent of your parents.

[5] I got a student loan and received a Pell Grant for that year. Does that count as a scholarship, because I didn't list it as one and maybe that is a mistake? It doesn't appear anywhere on my W-2 I don't think. And it's shocking that the government would give me so much money, but then it wouldn't have any relevance to my taxes.

A Pell Grant is a scholarship; a student loan is not a scholarship. The scholarship is taxable only to the extent that it exceeds the cost of your tuition and certain other qualifying expenses, such as books. You probably do not have to report any of the scholarship as income.

However... you said that your parents "paid for my tuition." But now it appears that most of your tuition was paid by a combination of scholarships and loans.

This raises a factual question as to whether your parents really supported you during 2007. The criteria to claim you as a qualifying relative is that they must have provided more than half of your support. Perhaps they did, especially if you include an accurate estimate of the fair market value of rent, groceries, and other expenses.

This is where an accountant would need a lot more data. Are you attending the local community college, or are you a grad student at Yale? Just how much of your tuition was paid by your parents may make a real difference in whether you qualify as their dependent...

What address should I send my bill to? LMAO

Why didn't your uncle do your taxes?

Your questions, and the level of detail you provided, are just sophisticated enough that I suspect that this post is really from a tax professional or a researcher who is conducting an experiment to see what kind of answers the tax professional community provides... or the extent to which this community will tolerate questions from nonprofessionals.

Or are you simply trying to demonstrate a flaw in TaxAct online?

The dependent question has to be there somewhere.

[Koss]

Do-it-yourself programs

What do I need to bring, how much does it cost, and how do I find a good one?

Money magazine, and their online incarnation, which is part of cnn.com, usually has an article available around this time of year that answers these questions...

EDIT: I just found a tab that lets me say I'm a dependent - somehow it skipped it, but on the review screen it let me review it and it cut the refund to $146 which seems much more believable to me...

Good job. Now that you've mastered doing your own taxes, you can move on to doing your own surgery. If you use Surgery for Dummies, make sure you read Chapter 5 on general anesthesia. I've done several estate tax returns for clients who somehow skipped that section.

[solomon]

The TP should go to a reputable EA or CPA now to begin a working relationship. He may not need the expertise of one of us now, but will one day. By beginning a relationship now the TP will become more educated with a good professional and will have confidence (at least somewhat) that his return is accurately prepared. Better yet, if he is still his parent's dependent he should go to their accountant and ask for free preparation. I do free preparation for dependent's of my clients in an effort to get them to continue to use our firm as they progress through life.

To imply that the people in VITA are not competent is fallacious - perhaps some are not but then I know incompetents (EA's) that don't work in VITA. That program takes returns up to 50K and I used to help out in that program and personally knew some CPA's and EA's that donated their time as well.

[Karl]

The Pell Grant didn't cover everything, and so they paid for the majority of it. I'm not at Yale, and I'm not at a community college either. But they definitely paid for the vast majority of my expenses, so I guess I am a dependent. I've just been saving my money.

Since I found the tab that lets me say I'm a dependent, I think that I am just going to file on the site. I would find a person, because I'm very easily confused and also afraid of the government. So, I want to pay my taxes correctly! But I may move soon, and I may go to graduate school which would mean moving again, and so I don't want to start building a relationship with someone. But that is a good idea, and thanks for all the advice.

You guys should add a little paypal tips button, and then buy random things with the donations and dish them out as prizes to forum members based on how helpful they are. Thanks for all the help! Hopefully I won't be thrown in prison if it is messed-up!

[veritas]

I am fearful

of our government too.

We still find the greedy hand of government thrusting itself into every corner and crevice of industry, and grasping at the spoil of the multitude. Invention is continually exercised to furnish new pretenses for revenue and taxation. It watches prosperity as its prey and permits none to escape without a tribute."
-- Thomas Paine

[FEDUKE404]

"The" question was there!

While Koss has written a marvelous set of answers, the tax return is not really that difficult. Any experienced preparer (you don't always need an expensive CPA) could easily lead you through the return.

I went back and looked, and noted that the third question in the referenced TaxAct interview mode asks "Can you be claimed as a dependent on someone else's return, such as your parent's return?" and then states "If you can be claimed as a dependent on your parent's or someone else's return, you will not be entitled to claim a personal exemption for yourself." By answering "yes" all problems re the dependency exemption should have been quickly eliminated.

Quite frankly, a careful reading of the interview questions should have guided you through the entire process........

You also made reference to "my parents claimed me in 2007." If that is the case, the IRS will bounce the second return to arrive with an exemption for you, which apparently will be your parents' return. That could provide a real surprise for them!

FE