On March 3, 2010, the Center for Tax Law and Employee Benefits’ Tax Law Lunch & Learn Series hosted “Tax Planning for Law Students,” presented by James Biege. Biege, a master tax advisor and enrolled agent at H&R Block, enlightened students to the numerous tax advantages available to undergraduate and post- undergraduate students across the nation. For those in attendance, the lecture provided extraordinarily useful information for tackling the financial implications of law school.
“Is a full-time law school student required to file an income tax return this year? Like all good law school questions, the answer is invariably maybe.”
Lawrence Khan (JD ’10), right, moderator of the Tax Law Lunch & Learn Series, welcomes James Biege, a master tax advisor and enrolled agent at H&R Block.
Between staying on top of reading, research, internships and externships, part-time jobs, and finals preparations, worrying about taxes seems to sink to the bottom of the priorities list. But taxes can’t be ignored. The overwhelming bulk of our government’s budget pools directly from income taxation. While some may not agree with the current administration’s spending policies, taxes collected by the government fund federal and state programs that create jobs, finance education opportunities, and provide the resources that make the United States one of the most coveted places in the world to live. Biege discussed the benefits of taxation, and addressed best practices for tax planning.
Out of the numerous issues Biege addressed, two of the students’ most frequently asked questions seemed noteworthy. First, is a full-time law school student required to file an income tax return this year? Like all good law school questions, the answer is invariably maybe. The answer depends on how much a student worked during the tax year. As of 2009, the standard deduction for an individual without any qualified dependants was $5,700. (The current amount can be found on Form 1040.) The standard deduction is deducted from yearly earnings, and does not have any prerequisites. If a student makes less than $5,700 during the tax year, he or she will not have taxable income; therefore, in many cases, students do not need to file tax returns. However, it may still be in a student’s best interest to file taxes if their employer has withheld earnings on their paycheck. That amount can find its way back to the taxpayer in the form of a refund, either directly deposited into a personal bank account or delivered in the mail.
Second, what other tax breaks are available to students? For one, the current administration has tweaked the once famous Hope Education Credit, and renamed it the Lifetime Learning Credit. This credit grants a deduction of up to $2,000 on the first $10,000 spent on college tuition. Although law students are not considered undergraduate students, the IRS allows law students to amend prior tax returns filed during the last three years in order to take advantage of tax credits they may not have known about at the time they filed their taxes. Students need not have fulfilled any minimum hour-per-semester requirements in order to qualify for this benefit, but the attended school must satisfy the qualified educational institution requirement. An eligible educational institution is a college, university, vocational school, or other post-secondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. With almost every school satisfying this requirement, it is one of the most easily obtainable tax credits available to students.
By Christopher Poisson JD candidate
Biege also stated that student loan interest can also serve as a valuable tax-reduction tool. Although subject to gradual phase-out for higher income earners, the government seems intent on rewarding people for taking education seriously and bettering their future by granting this deduction.