Filing back taxes for a college kid

jyl · jyl's Garage

My daughter, who is now 20 y/o, has been working summers since she was 15. I had her get copies of her W2 forms for 2011-2016. She's made anywhere from $3,000 to $7,000 each summer. Over that period, about $1,000 has been withheld for Federal income tax.

Seems like she should file tax returns for those years and get those federal taxes refunded, right?

Any tips or other ideas? Just use a 1040EZ?

fintstone · fintstone's Garage

Not a pro here, but I am pretty sure that you cannot get a refund if the year not filed is longer than 3 years past. Some years she may have been required to file if she exceeded the personal deduction for that year and may owe taxes/fine.

stomachmonkey · 05-07-2017, 10:11 AM

Probably a can of worms I'd not open.

HardDrive · 05-07-2017, 10:18 AM

She's young, unlikely to get audited in the next 10 years. Start filing properly now and let sleeping dogs lie. You could easily cause her a lot more than $1000 worth of trouble.

red-beard · red-beard's Garage

Even if you don't get the money back, you need to file the returns

ossiblue · 01:20 PM

First, if her income was under $10K/year, she didn't have to file a return and is in no "danger." Now, that limit is for 2016, and may be a bit lower for earlier years, but it is unlikely she is liable. There is no need to file a return if one's income is below the minimum level unless they have a refund. A missing filing may raise questions from the IRS once you start filing regularly, but the W2's are already on record for the years where your income is below the filing threshold.

Second, the time limit for claiming a refund is 2 years after the date the tax was paid, if no return was filed. In your daughter's case, any money paid in taxes prior to 2015 is now lost.

Is the $1000 dollars she has paid the total from 2011-2016? If so, then the amount she is seeking, only from 2015-2016, must be much less. It's only the cost of a stamp, so it may be worth it.

dennisO · 05-07-2017, 10:34 AM

The IRS and State (Calif in my case) have income limits thresholds for filing tax returns. For 2016, the Federal limit was $10,300 before you had to file. There are additional restrictions which could change this amount, so check the IRS website and your state website for your daughters case.

masraum · 05-07-2017, 06:50 PM

OK, the original question seems to have been answered. She's unlikely to get most of the money back. I wouldn't be surprised if the IRS levied late filing fees on her for not filing or something eating away at her last 2 years of returns.

Now the question on everyone's mind: How has this not come up before now?

As soon as I got my first official job with a paycheck and W-2 my parents told me I had to file (ie, we blew it off when I was 13 and mowing lawns for $5 or $20), helped me through it back when it was all on paper. For the past 5 years, she could have been doing it online or at the very least via a computer.

john70t · 05-07-2017, 07:28 PM

Quote:

Originally Posted by masraum

For the past 5 years, she could have been doing it online or at the very least via a computer.

Just my opinion but unless a secure connection is guaranteed, such as logging in directly at a local IRS hub, the bad guys are still out there.
Paper is better verification.

$4M was accumulated by only these two guys:
https://www.usnews.com/news/best-states/mississippi/articles/2017-04-21/2-mississippi-men-sentenced-for-filing-false-tax-returns.

masraum · 08:16 PM

Quote:

Originally Posted by john70t

Just my opinion but unless a secure connection is guaranteed, such as logging in directly at a local IRS hub, the bad guys are still out there.
Paper is better verification.

$4M was accumulated by only these two guys:
https://www.usnews.com/news/best-states/mississippi/articles/2017-04-21/2-mississippi-men-sentenced-for-filing-false-tax-returns.

Those two guys worked as tax preparers and put bogus info on tax returns to get clients extra money on returns or reduce tax liability. That's got NOTHING to do with whether your taxes are filed via the 'Net.

Quote:

According to court documents and proceedings, Washington was a tax return preparer who owned and operated Flash Financial, and Brice was Washington’s sole employee. From 2009 through 2011, the two men filed fraudulent tax returns for multiple clients with the Internal Revenue Service (IRS) that included bogus education expenses and retirement contributions, which they never discussed with their clients. As a result, the clients received refunds they were not entitled to.

I do know that there are lots and lots and lots of folks out there that will file many fraudulent tax returns under the names and SSN of other people to get returns. I believe that 99.9% of the time, that also has nothing to do with someone filing via the 'Net.

You can file on secure sites like Turbo Tax and various other tax sites. Those sites are potentially insecure if they have a bug or aren't up to current code or weren't smartly planned out. I suspect Intuit's site is pretty secure, and they probably don't hold any or much customer info other than to allow it to pass through their network.

To get data from someone filing via the 'Net, you'd pretty much have to hack either the person's computer or the server at the remote end or have physical access to the path between the two.

In the grand scheme of things, filing via the 'Net is, I believe, not as risky as using a credit or debit card to purchase things anywhere in the world.

jyl · jyl's Garage

Just never occurred to us. I knew she didn't owe and didn't need to file, but it never crossed my mind that the city of Berkeley (she works in a summer camp) would withhold taxes from a seasonal employee making $44/day.

Now she's making $100/day and it's starting to matter. I checked and 2014-2016 they withheld $500 federal plus some state, as a college kid she could use that money.

She paid for her recent year in Europe from her earnings and now she's pretty broke. Her job doesn't start up until June so she wants to make some money now. She's okay with borrowing money but wants to have a way to pay it back.

She has managed to make $500 in a month selling unused clothes and purses on Poshmark, including buying stuff cheap at Goodwill and reselling it for 2-3X.

ossiblue · 07:58 AM

Quote:

Originally Posted by jyl

Just never occurred to us. I knew she didn't owe and didn't need to file, but it never crossed my mind that the city of Berkeley (she works in a summer camp) would withhold taxes from a seasonal employee making $44/day.

Now she's making $100/day and it's starting to matter. I checked and 2014-2016 they withheld $500 federal plus some state, as a college kid she could use that money.

She paid for her recent year in Europe from her earnings and now she's pretty broke. Her job doesn't start up until June so she wants to make some money now. She's okay with borrowing money but wants to have a way to pay it back.

She has managed to make $500 in a month selling unused clothes and purses on Poshmark, including buying stuff cheap at Goodwill and reselling it for 2-3X.

(From bold, above)

The regulations state that if there wasn't a filing, the statute of limitations on a refund is 2 years from the date the tax was paid (withheld.) Since your daughter didn't file, that 2 year window began Dec. 31, 2015, and closes Dec. 31, 2017 Her earnings in 2014 are not subject to refund because it has been more than 2 years since the taxes were paid, that window closed on Dec. 31, 2016.

Here's what may be confusing. If she had filed in 2015, that would be for her earnings in 2014. The regulations state that if one did file, then the statute of limitations on a refund is 3 years. She would be allowed to claim a refund on those 2014 earnings, and even 2013 if she filed for those in 2014. Since she did not file, however, the window of opportunity is from the date the taxes were paid, and that would be 2015.

Here's the actual regulation:

Claim must be filed within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid
https://www.irs.gov/businesses/exhibit-b-rc-refund-claims-limitation-periods-published-5-2008

So, limiting the amount withheld to 2015 and 2016, that is what she can file for, and is likely worth it, IMO.

masraum · 05-08-2017, 10:30 AM

Quote:

Originally Posted by jyl

Just never occurred to us. I knew she didn't owe and didn't need to file, but it never crossed my mind that the city of Berkeley (she works in a summer camp) would withhold taxes from a seasonal employee making $44/day.

Now she's making $100/day and it's starting to matter. I checked and 2014-2016 they withheld $500 federal plus some state, as a college kid she could use that money.

She paid for her recent year in Europe from her earnings and now she's pretty broke. Her job doesn't start up until June so she wants to make some money now. She's okay with borrowing money but wants to have a way to pay it back.

She has managed to make $500 in a month selling unused clothes and purses on Poshmark, including buying stuff cheap at Goodwill and reselling it for 2-3X.

I get it. It's easy to not think about that sort of thing. If it was me (as the dad) I would feel mostly responsible, and would "refund" what she is now out for the years that the IRS and state of Cali, won't give back, and then have her file for the last year or two that is available from the IRS.