It is tax filing season again and a teachable moment for first time taxpayers and seasoned taxpayers! 

Taxpayers of all ages should be lifelong learners as the tax laws change a little each year. Below are a few misconceptions that occur among taxpayers who are still learning about income tax laws followed by brief explanations to understanding the misconception.  Also listed are resources you can use to stay on top of yearly tax law changes made by Congress, just before the filing season starts.

 Misconception: I can deduct my contributions to charitable organizations on my income tax return.

Yes you can but only if you itemize your deductions using a Schedule A. Federal tax laws gives you opportunities to reduce your income before the amount of your income that will be taxed is determined. One reduction comes when you determine if you will itemize your deductions using the categories on a Schedule A or use the standard deduction amount.  The standard deduction amount is a number set by the tax laws for your filing status (single, married filing joint, married filing separately, head of household). You will use the higher number of the two amounts (itemized deduction or standard deduction). Standard deduction amounts are adjusted up each year for inflation. For 2014 standard deduction amounts, see page 2 of the Form 1040-under Taxes and Credits. In general, if you are a homeowner and pay mortgage interest and have property taxes combined with other items listed on Schedule A, it is usually more beneficial to itemize your deductions.

Misconception: I can deduct my out of pocket medical expenses on my income taxes.

Yes, but only those expenses that EXCEED 10% of your adjusted gross income (line 37 on the Form 1040).  (In 2014, this percentage increased from 7.5% to 10% for everyone born after 1950). Unless you or a dependent have extremely high medical bills, you are not likely to have expenses that exceed 10% of your AGI-adjusted gross income.  For example, say your total income was $60,250.  You spent $250 of your own money for supplies used in your classroom that were not reimbursed by your district (see line 23 on Form 1040).  You can subtract the $250 from your income as an adjustment making your AGI (line 38 on Form 1040) $60,000.  Receipts for your medical expenses totaled to $1000.  When you multiply your AGI ($60,000) by 10% the total is $6,000.  Only expenses ABOVE $6000 can be included on the Schedule A as an itemized deduction.  In short, keeping tracking of out of pocket medical expenses is great information for other purposes but you may not be able to list the amount on your tax return as a deduction!

Misconception: I worked a part-time job in the summer but did not earn enough money to file a tax return.

Teenagers and others who work occasionally might not earn enough to have a legal requirement to file a federal tax return in a given tax year.  However, if federal taxes were withheld from their pay, (see box 2 on the form w-2) you may be able to get the taxes withheld back if you file a tax return.  Caution:  Even if you don't have to file a federal tax return, you are required to file a tax return in Pennsylvania if you earned $33 or more of taxable income in Pennsylvania. See page 7 of the Form 1040 Instruction Booklet to see filing requirements applicable to most people.

Learning about or keeping up with tax law changes can be fun!  You earn the money that is subject to tax. The best way to pay your fair share and no more is to be informed about the laws and how to apply them to your personal situation. It's not hard. It just takes a little time to learn the tax language and the basic formula of how income taxes are calculated.  Once you understand the basics, you have the foundation to keep up with the never ending changes that we get each year. To see the new changes in the income tax code each year, consult the "What's New" section of IRS Publication 17 or the 1040 Instruction Booklet.

Finally, you will have to work and pay taxes, what you learn about them is up to you. Start today because you will be held responsible for paying them.

Teacher Training Programs from the Federal Reserve Bank of Philadelphia

The Federal Reserve Bank of Philadelphia's economic teachers offer one-day, three-evening, and week-long professional development programs aimed at equipping K-12 teachers with the skills and knowledge to better teach their students about economics and personal finance in their own classrooms. Pennsylvania teachers receive Act 48 credit. Visit their website for more information and to register. 

- Personal Finance for the Middle School Classroom II: March 11, 18, and 25, 2015

- Keys to Financial Success Teacher Training Program: July 16-10, 2015

- Making Sense of Money and Banking: July 20-24, 2015

Financial Literacy Summit 2015