April 15 looms less than three months away.

As the deadline approaches, students must determine whether they should file with the Internal Revenue Service and decide how to do it. If a student’s earned income is less than $4,250 or unearned income in interest and dividends is less than $700, he or she does not have to file a return.

But according to the IRS’s Web site, taxpayers who had taxes withheld from paychecks are entitled to a refund and must file a return to receive it.

For people outside those constraints the next step in preparing returns is to collect all necessary forms, said Mark Schulhof, an associate editor at Kiplinger’s Personal Finance Magazine.

The W-2 for wages and 1099 forms for interest, dividends and other types of income should have been sent to taxpayers by Jan. 31. The IRS advises taxpayers to ask for the forms if they have not already received them.

Taxpayers have several options in completing their returns. Schulhof said students should prepare their own returns because it is a “good idea to learn.”

Students who complete their own returns can get how-to information on the IRS Web site at www.irs.ustreas.gov or refer to numerous books available on the subject.

Students can also consult professional tax preparation firms. But Schulhof warned that firms can be expensive, especially when they handle traditional student returns. Another option is a traditional accounting firm.

Using tax software is also an option for students who complete their own forms, Schulhof said. He said software options include “Turbo Tax” and “Kiplinger’s Tax Cut.”

Recently, several new tax laws were passed that may help students or their parents reduce tax liability.

The Hope Scholarship credit enables taxpayers to deduct up to $1,500 in tuition and fees paid in 1998 from their tax liability. The Lifetime Learning credit allows taxpayers to deduct up to $1,000 in tuition and fees. Schulhof said students must meet several criteria to qualify for the credit.

“If your parents claim you as a dependent, they can claim it. You can’t,” he said. “You can only claim one. The Hope Scholarship is only for the first two years in college.”

In addition, taxpayers can now deduct interest on their student loan. While the deduction applies to all student loans, including federal and private loans, Schulhof said the deduction has some income limitations.

“If you are in the process of repaying a loan you can deduct up to $1,000 of interest,” Schulhof said.

Schulhof said Individual Retirement Accounts are another deduction option. The regular IRA enables taxpayers to receive a deduction, while the relatively new Roth IRA does not. Schulhof said taxpayers must have $2,000 in earned income to claim the deduction.

The Roth IRA, named after sponsor Sen. William Roth (R-Del.), recently was enacted as part of the Taxpayer Relief Act of 1997. While Roth IRAs do not allow an immediate tax deduction, they do allow the earnings and distributions in them to be received tax-free. Traditional IRAs offer current tax benefits, while the Roth IRAs allow future tax savings.

The deadline for mailing returns is April 15, 1999, but Form 4868 provides a four-month automatic extension. Along with Form 4868, taxpayers must send payment if a balance is due on their account.