Taxes
Taxes are complicated, and, while it is against University policy to provide tax advice, we can provide education on common terminology, concepts, and forms that will be beneficial to understand when filing your taxes.
Key Terms
There are several basic terms to understand when preparing your taxes.
Understanding Your Pay
Your earnings statements from any jobs you have should list gross and net pay as well as a breakdown of how tax withholding and other information impact your take-home (net) pay.
- Gross Pay = Amount of money you receive from a single employment position before taxes and other deductions have been removed
- Net Pay = Amount of money you receive from a single job after taxes and other deductions have been removed from your paycheck
Withholding vs Liability
- Tax Withholding = Amount of taxes your employer withholds from your paycheck and sends to the government is calculated based on info you provide on the W4
- Tax Liability = Refers to taxes you owe to federal, state, and/or local government
If you don’t estimate your tax liability or complete the W4 accurately, you could either owe taxes or get a refund when you file.
Tool: Tax Withholding. via IRS. This tool can help you estimate taxes as an individual taxpayer, employer, or foreign national.
Tax withholding and liability are critical concepts to understand if you have assistantships or fellowships for funding your degree. Learn more about taxability of graduate level tuition & service fee waivers on our Taxability of Tuition Waivers page.
Exemptions
Some income, transactions, or organizations are exempt from paying taxes.
- Tax Exemptions = Income or transactions that are free from tax at any level of government
More information about tax exemptions:
Income
All sources of income are considered taxable. There are two terms to describe your overall income.
- Individual Gross Income = Amount of money you receive from all sources (jobs, interest payments, bonuses, etc.) in a calendar year
- Adjusted Gross Income (AGI) = Amount of money after specific tax deductions are applied that is used to determine the amount of taxes you owe for the year
Credits vs Deductions
Deductions are subtracted from your Individual Gross Income to lower your taxable income. You can choose to itemize your deductions or take the standard deduction, which varies depending on the year and your individual tax situation. Examples include charitable giving, healthcare costs, home office & job-related expenses.
Credits can be subtracted directly from taxes you owe. Two examples of tax credits include The Earned Income Tax Credit and Child and Dependent Care Tax Credit.
Source: Credits and Deductions via IRS
FICA
FICA stands for Federal Insurance Contributions Act which funds Social Security & Medicare.
The amount of FICA taxes withheld from your paycheck depends on your gross pay.
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Enroll in the Earn course to learn more about...
Free Tax Prep & Helpful Services
VITA Program in Urbana
University of Illinois Urbana-Champaign's College of Business hosts a VITA Site on Campus each spring which serves the local community and domestic students.
United Way
United Way's MyFreeTaxes is available for taxpayers that earn less than $60,000. If you choose to file yourself, software is available for taxpayers that earn less than $79,000 (as of 2023 tax filing season).
IRs Tax Tips
You can subscribe to IRS Tax Tips to get brief emails summarizing a wide range of tax topics like where to get free tax help and more throughout the year.
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Listen to our podcast on taxes to learn about terms, forms, and more...
Forms
There are many forms at various stages of the tax-planning timeline that you may need to complete or have access to for filing your taxes. Depending on your relationship with the University, you could receive or need to complete any of the following forms (which is not a comprehensive list):
W-4 Form: Employee Withholding Certificate
The W-4 is completed during the onboarding process for new employees, and it allows taxpayers to communicate their tax liability to employers. Employers then use the information from that form to calculate tax withholding amounts.
If there is a change in your tax liability situation, you may want to update the allowances you claim on your W-4 so your employer can calculate withholding accurately.
W-2 Form: Wage and Tax Statement
W-2 forms are provided by individual employers and summarize individual gross income and taxes withheld for the entire calendar (tax) year.
You will receive a W-2 Form for each employer that you've worked for during a calendar year if you are a regular employee.
If you are a contract worker, you may receive a 1099 Form instead of a W-2.
1098-T: Tuition Statement
The IRS requires educational institutions to provide this form for any enrolled student who has had a reportable transaction.
University of Illinois provides this form electronically each spring. You can learn more about how to access it at Understanding My 1098-T.
1098-E: Student Loan Interest Statement
This form is provided by your student loan servicer when you've made any payments toward your student loan interest which may help in deciding if you qualify for student loan interest payment deductions.
You can learn more about the 1098-E Tax Form from US Department of Education or your student loan servicer(s).
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Visit University Bursar's website for more information on understanding your 1098-T...
