Filing Individual Income Tax Returns FAQ. - Page 13

Originally Posted by msaccountant

The purpose of this thread is to try and educate fellow DREAMers about filing individual income tax returns. I won't go into full details again like I have said again and again I'm no tax expert but I do have basic knowledge when it comes to this and I will try my best to help anyone out. Any other members on here accounting majors, business majors, and anyone that has experience/knowledge is more than welcome to help out.

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What do I do with my ITIN now that I have an SSN?

Once you're approved for DACA/EAD and have received your new SSN you must give up your ITIN.
This thread will tell you what you have to do: http://dreamact.info/forum/showthread.php?t=33829

Once you do that you will not use your ITIN to file taxes ever again your new SSN will be the number you use from now on.

Do I qualify for the Earned Income Credit/Earned Income Tax Credit?

Depends. You must be at least age 25*, your filing status must not be Married Filing Seperately, have a vaild SSN, and meet the income requirements.

Once you're approved for DACA/EAD and have received your own SSN you will have a valid SSN. However, you must know that if anyone on your tax return does not have a valid SSN you will not receive the credit.

I would advise those of you that previously had an SSN to get a new card before you file because if the preparer sees that it says it's not valid for employment then they will think you don't qualify for the credit.

*If you have children the age limit does not apply to you.

In addition, only the following income is classified as taxable earned income:

• Wages, salaries, tips, and other taxable employee pay;
• Union strike benefits;
• Long-term disability benefits received prior to minimum retirement age;
• Net earnings from self-employment if:
• You own or operate a business or a farm or
• You are a minister or member of a religious order
• You are a statutory employee and have income.

The following is referred to as unearned income:

• Pay received for work while an inmate in a penal institution*
• Interest and dividends
• Retirement income*
• Social security*
• Unemployment benefits*
• Alimony
• Child support

*Don't think any of you received that but still good to know.

Do I qualify for Education credits such as the American Opportunity Credit, Lifetime Learning Credit, or the Tuition and Fees deduction?

First of all to qualify for any of the credits the amount you are trying to deduct must be paid out of pocket, if it's a scholarship or perhaps you receive state aid that portion is not tax deductible.

Second, no matter who paid the tuition if your parents claim you as a dependent (they provide over half of your own support i.e.: pay bills, food, clothes, transportation expenses) then they will claim the education credit. This is tax law not something you can decide or argue with your folks about. If your parents do not have a SSN in other words they're undocumented they can still claim the credit.

Third, you may only claim one of these. (i.e. This year John is claiming the AOC therefore he cannot claim the LLC too.)

American Opportunity Credit (AOC)

To qualify you must be attending an accredited school at least as a half time student for at least one academic period. (i.e: Half time student for spring semester)
You must be deducting educational expenses that were paid out of pocket for the first 4 years of higher education (undergrad).
You must not be convicted of a felony.
Also, you must be receiving a degree and/or certificate.

The following do not qualify as education expenses:
Room and Board, Parking Permit, Student Health Insurance, Travel and Research expenses.

The following qualify as education expenses:
Books, equipment, fees, and supplies only if they are required for the course.

The maximum credit per student is $2,500.

The AOC is the only refundable education credit.

Lifetime Learning Credit (LLC)

To qualify you must be attending an accredited school.
Unlike the AOC you do not have to be an undergrad and you don't have to be attending at least half time.

No limit to how many years you can claim it.

The following expenses will qualify as educational expenses:
Tuition and any amount that's paid directly to the school to cover course-related books, fees, equipment, and supplies that are required. If you are purchasing any of these at a bookstore, internet, or somewhere else then they don't qualify.

The maximum credit per family/return is $2,000.

Tuition and fees deduction

Same requirements as the LLC only difference is this is an adjustment to income not a credit.

Do I have to file a tax return?
This is a 'tricky' question.

I assume we all are under age 65.

If you are filing as single your gross income would have to be > $9,750.
If you are filing as married filing jointly your gross income would have to be >$19,500.
If you are filing as married filing seperately your gross income would have to be >$3,800.
If you are filing as head of household your gross income would have to be >$12,500.
If you are filing as a qualified widow(er) your gross income would have to be >$15,700.

Now depending on your filing status if your income is less than the amount listed you are not required to file. However, I strongly recommend that you do since filing tax returns shows good moral character and you might be missing out on a refund no matter what the amount might be!

FYI: If you are self-employed/treated as an independent contractor then I suggest you file as well please don't think that just because you were paid under the table that you do not have to file or have no 'right' to.

Please also remember that if you're parents/guardians claim as dependents then wherever you get your return done you must let that preparer know that your folks are claiming you. Also, if that's the case that's no reason to not file a tax return.

Where could I file my return?

You could file your return if you qualify in a community VITA program in your area.
Here's a link to find one near you: http://irs.treasury.gov/freetaxprep/

If you don't find one or if you happen to not qualify you could also visit a reputable local accounting firm/office. I would not advise doing returns with 'notarios' or places like HRBlock. Usually those folks are just in it for the money and in the end amending returns can be a hassle and very costly as well.

Am I eligible to file FORM 1040?
If you've lived in the USA for more than a year you are eligible to file either the FORM 1040 or 1040EZ.

***Very important Information!***
Once you get approved you may go back 3 years and amend your returns. Those 3 years include 2011,2010, and 2009. If for some reason you didn't file a return at that time you are also able to file it now. Right now the priority is 2009 since from now till April 15th is the last chance you have to amend your '09 return and get a refund!


FYI: E-filing and choosing direct deposit is highly recommended. If you know you will owe money especially if you are self-employed and you do not make estimated tax payments throughout the year then I recommend filing the earliest you're able to and pay the most you can before the final day of tax season (April 15th).
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This is what I have so far I will try and add more information as days pass by so please keep visiting the thread.

If anyone has anything else they'd like me to add then speak now (PM me or post on here). I will try with the best of my knowledge and by researching to assist y'all.

Mods: I posted this on the Other Topics thread because I don't see how this is related to DACA or the DA/CIR but if you feel it should go somewhere else then please feel free to move it.

Thanks to all DAP members for their input.