Friday, May 20, 2022

How Do You Do Taxes

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Filing Your Taxes Today Find Out How The Irs Lets You Do It For Free

How taxes do you.

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Free File is the IRS tax preparation software program that allows taxpayers below a certain income threshold to file their taxes at no cost. The IRS has partnered with private companies that provide the service via the government agency for free to those whose adjusted gross income is $72,000 or less.

Those who qualify will be able to select one of the partner programs for a free file and preparation in partnership with the IRS.

For those taxpayers that make above the $72,000 threshold, the IRS still provides the Free File Fillable Forms option. This provides electronic federal tax forms that can be filled out and filed online for free. When using this option, taxpayers should generally already know how to prepare their own tax returns.

To use these options, start at the IRS.gov website here.

Starting from the homepage, select File Your Taxes For Free. Then, pick an option based on your income level and simply follow the links to the chosen providers website. It might look at first as though you are being redirected to another site that will make you have to pay, but note that this is an IRS-approved partner if and only if your starting point is the designated irs.gov website to begin with.

Fridays deadline is for taxpayers who requested the six-month extension. This is the final deadline for those individuals and tax returns should be filed on or before Oct. 15.

Extension To File Your Tax Return

If you cant file your federal income tax return by the due date, you may be able to get a six-month extension from the Internal Revenue Service . This does not grant you more time to pay your taxes. To avoid possible penalties, estimate and pay the taxes you owe by the tax deadline of May 17, 2021.

Should I Take The Standard Deduction Or Itemize My Taxes

If you have a sizable amount of tax credits and deductions, it wouldnt hurt to run the numbers to see if itemizing your taxes could result in a lower tax obligation for you versus a standard deduction. Itemizing deductions could even put you in to a lower tax bracket.

With the Tax Cut & Jobs Act enacted a few years ago, the standard deductions had nearly doubled, and significantly fewer taxpayers are itemizing deductions .

The standard deductions for 2020 are:

  • $12,400 for single filers
  • $12,400 for married, filing separately
  • $24,800 for married filing jointly
  • $18,650 for head of household
  • $0 personal exemption

If your itemized deductions dont surpass those amounts, the standard deduction is the way to go .

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Can You Afford Tax Installment Payments

Your next step is to determine if you can afford to repay your past taxes on your own and if so, to arrange a tax repayment plan. CRA will make payment arrangements if you can repay your total taxes within one year. If youve been working with a CRA collection officer, be honest with them about your situation. Propose a tax installment plan that is both fair and affordable.

If you owe substantial penalties & interest, but can afford to repay the underlying tax debt, you can work with a tax lawyer to negotiate a reduction in penalties and interest. However, CRA will not negotiate a private tax settlement either directly with the tax payer or through a tax lawyer in Canada that does not see the total taxes owing paid in full.

CRA may request faster payment. You can consider taking out a loan to pay CRA, however, this will depend on your credit capacity and credit score.

Once you have a deal you can make your payments online but be sure you make all agreed upon payments in full and on time.

Which Form Do You Need

3 Ways You Can Do Your Taxes for Free

While using a computer program can make doing your taxes a breeze, Id encourage you to at least try doing your taxes the old-fashioned way with pen and paper at least once. Flipping through the IRS instruction book to help you figure out your taxable income is a great way to become familiar with the basic rules and regulations of the tax code. Plus, theres something about the tactile nature of pen, paper, and calculator that makes doing your taxes oh so romantic. Wear a green eyeshade for added effect. You can or just swing by your local library they should have a rack full of them.

There are three different kinds of personal tax forms to choose from: 1040EZ, 1040A, and 1040. They vary in length and complexity. Your goal is to pick the simplest form for your situation. When you do your taxes with tax software, the computer determines what form you should use based on the information you provide. When you do your taxes by hand, you have to figure out which form to fill out yourself. Heres how to do it:

1040EZ. The 1040EZ form is the shortest and EZiest to fill out. You qualify to use the 1040EZ form if you meet the following requirements:

Basically, if your income only came from wages and some bank interest, and you dont have any income adjustments in the form of deductions, use the 1040EZ form. If youre young, in college, or dont own a home, this probably describes you.

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Don’t Forget About Your Gig Economy Income

Millions of young people participate in the gig economy as rideshare drivers, making package or food deliveries, freelancing full or part-time or working as a project-based consultant. If you’ve earned income from freelancing, don’t forget to report your gig work income on your tax return.

  • Depending on how much you earn, you may receive a 1099-MISC for your work. But even if you don’t, you still need to report the income to the IRS.
  • You’ll report your gig work income on Schedule C attached to your Form 1040.
  • Usually, you can deduct any expenses related to your gig work, such as miles driven, supplies and advertising costs on Schedule C as well.

When Is The Tax Deadline

This years IRS tax filing deadline is Monday, May 17, 2021 pushed back from the standard April 15 deadline. No weekend extensions to push it beyond the 15th this year, as in recent years.

The tax filing deadline AND payment deadline, if you are out of country, is Tuesday, June 15, 2021.

Note that these are the dates that you must have your return postmarked or e-filed.

If you have income from self-employment or other income that is not typically withheld, you may need to make estimated tax payments throughout the year. The due dates are as follows:

Time Period:

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Finding The Amounts Of Your First And Second Stimulus Checks

To find the amount of stimulus payment youve received, you can:

  • Refer to the IRS notices that were mailed to you. IRS Notice 1444 shows how much you received from the first stimulus check and IRS Notice 1444-B shows how much you received from the second stimulus check.
  • Check your bank statements. If you had your payments direct deposited, you can find the amount of your first and second stimulus check using your bank statements. They should be labeled as: IRS TREAS 310.
  • Request an account transcript. You can request an account transcript sent electronically or by mail using Get Transcript. You can also call the IRS automated phone transcript service at 800-908-9946 or mail in Form 4506-T to have your transcript be sent by mail.
  • Create an account on IRS.gov/account. You can view your stimulus check amounts under the Tax Records tab. If you filed jointly with your spouse, you will only see your half of the stimulus check amounts. Your spouse will need to sign into their own account to see the other half of the stimulus check amounts.

To create an account, you will need:

  • Basic information: full name, email, birthday, Social Security Number or Individual Tax Identification Number , tax filing status, and current address.
  • After providing the amount of your first and second stimulus check, GetCTC.org or the tax software will calculate the total amount that you are owed.

    How Should I Pay My Taxes

    How Much Do You Have To Make To File Taxes

    For reasons I just highlighted, I recommend that you pay your taxes online its quicker, safer, more reliable, and can help prevent identity theft tax fraud.

    There are ways to actually pay your taxes with a credit card and profit. With estimated tax payments, there are abundant opportunities to do so .

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    How Your Paycheck Works: Deductions

    Federal income tax and FICA tax withholding are mandatory, so theres no way around them unless your earnings are very low. However, theyre not the only factors that count when calculating your paycheck. There are also deductions to consider.

    For example, if you pay any amount toward your employer-sponsored health insurance coverage, that amount is deducted from your paycheck. When you enroll in your companys health plan, you can see the amount that is deducted from each paycheck. If you elect to contribute to a Health Savings Account or Flexible Spending Account to help with medical expenses, those contributions are deducted from your paychecks too.

    Also deducted from your paychecks are any pre-tax retirement contributions you make. These are contributions that you make before any taxes are withheld from your paycheck. The most common pre-tax contributions are for retirement accounts such as a 401 or 403. So if you elect to save 10% of your income in your companys 401 plan, 10% of your pay will come out of each paycheck. If you increase your contributions, your paychecks will get smaller. However, making pre-tax contributions will also decrease the amount of your pay that is subject to income tax. The money also grows tax-free so that you only pay income tax when you withdraw it, at which point it has grown substantially.

    How Your Paycheck Works: Fica Withholding

    In addition to income tax withholding, the other main federal component of your paycheck withholding is for FICA taxes. FICA stands for the Federal Insurance Contributions Act. Your FICA taxes are your contribution to the Social Security and Medicare programs that youll have access to when youre a senior. Its your way of paying into the system.

    FICA contributions are shared between the employee and the employer. 6.2% of each of your paychecks is withheld for Social Security taxes and your employer contributes a further 6.2%. However, the 6.2% that you pay only applies to income up to the Social Security tax cap, which for 2021 is $142,800 . Any income you earn above $142,800 doesnt have Social Security taxes withheld from it. It will still have Medicare taxes withheld, though.

    There is no income limit on Medicare taxes. 1.45% of each of your paychecks is withheld for Medicare taxes and your employer contributes another 1.45%. If you make more than a certain amount, you’ll be on the hook for an extra 0.9% in Medicare taxes. Here’s a breakdown of these amounts:

    • $200,000 for single filers
    • $250,000 for married taxpayers filing jointly
    • $125,000 for married taxpayers filing separately

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    How To Actually File Your Return

    In order to file your tax return, you need to complete Form 1040. Itâs the basic federal income tax form and basically the only taxpayers who donât use it are nonresident aliens.

    The general 1040 instructions are simple: you add up all of the income you earned, you claim deductions and credits to adjust that income, and then you calculate how much tax you should have paid in order to see whether or not you paid enough. You will need to attach other forms or schedules to claim deductions and credits, as well as to provide proof of your financial situation. For example, you should attach all W-2s to your 1040.

    We have created a detailed guide to filling out Form 1040, including line-by-line instructions and the additional forms you may need to attach.

    There are three main ways to file your tax return:

    • E-file

    • Mail a paper return

    • Work with a professional

    Free Electronic Filing For Individuals

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    The Arizona Department of Revenue will follow the Internal Revenue Service announcement regarding the start of the 2020 electronic filing season. Because Arizona electronic income tax returns are processed and accepted through the IRS first, Arizonas electronic filing system for individual income tax returns is dependent upon the IRS’ launch date. Remember, the starting point of the Arizona individual income tax return is the Federal Adjusted Gross Income. The Arizona Department of Revenue will begin processing electronic individual income tax returns beginning mid-February.

    Taxpayers can begin filing individual income tax returns through Free File partners and individual income tax returns will be sent to the IRS starting mid-February. Tax software companies also are accepting tax filings in advance of the IRS’ launch date.

    Please refer to the E-File Service page for details on the e-filing process.

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    How Filing Online Impacts Your Tax Refund

    Filing your taxes online is instantaneous, unlike mailing a paper tax return which takes time to reach the IRS.

    Submit your forms online and youll get a notification from the IRS saying that they successfully received it, or an error occurred. If the IRS owes you a tax refund, you can have this direct-deposited into your bank account, or they will mail you a check. The former is quicker and eliminates the risk of your money getting lost in the mail.

    B Hire And Work With A Tax Preparer

    While it’s never been easier to do your own taxes using software, as your financial life gets more complex you might wonder if you’re missing something and should get someone to prepare and help file your taxes. If you have a business or a healthy side gig, or you just want help understanding all of the forms, you might seek out a professional’s guidance.

    » Find a local tax preparer for free:See who’s available to help with your taxes in your area

    If you don’t want to meet in person with a tax preparer, theres a way to file taxes without leaving the house. A secure portal lets you share documents electronically with a tax preparer. Typically, the preparer will email you a link to the portal, youll set up a password and then you can upload pictures or PDFs of your tax documents.

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    Paid Tax Preparation Help

    To be sure, some people may still want to pay for help in filing their taxes because they don’t qualify for a free program or don’t want to spend the time to do their own taxes. There are many online software programs that help people file for a fee, and have products serving a wide range of tax scenarios at different price points.

    If you have a more complicated return, such as you itemize deductions, are a sole proprietor with income or run a small business, you may want to get help via a software program or hire an accountant or other tax expert to help you file.

    Free Federal Tax Filing Services

    How to Do Your Taxes EXPLAINED!

    The IRS offers free services to help you with your federal tax return. Free File is a service available through the IRS that offers free federal tax preparation and e-file options for all taxpayers. Free File is available in English and Spanish. To learn more about Free File and your free filing options, visit www.irs.gov/uac/free-file-do-your-federal-taxes-for-free.

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    What Is A Tax Exemption

    A tax exemption is the right to exclude certain amounts of income or activities from taxation.

    A few years ago, taxpayers were able to exclude $4,050 or more off their income by claiming personal exemptions. Personal exemptions no longer exist.

    Send your tax refund straight to an IRA account

    Can I Still Lower My Tax Obligation For Last Year

    Yes. Even after a calendar year is over, there are still last minute tax deductions and credits that can lower your taxes, up until the tax deadline.

    You can contribute to personal retirement accounts, such as a Roth or traditional IRA, Keogh Plan, HSA , or . Contributions are considered tax-deductible since you will pay taxes on that income when you withdraw funds. The IRA contribution deadline and HSA contribution deadline are the same date as the tax deadline .

    Contributing will lower your overall adjusted gross income and potentially bring you a bigger return or cut the taxes you owe. And its an above the line deduction, which means that you do not need to itemize to claim it.

    Make sure your income is eligible for these contributions, based on income level, before you contribute. If your income is low enough, you might also qualify for the Savers Credit for contributing to one of these types of retirement accounts.

    However, it is too late to take advantage of many tax deductions for 2020, such as charitable contributions or employee contributions to tax advantaged accounts . The deadline to contribute was the final day of the calendar year.

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    Extension Filers: File Your Tax Return By October 15

    Your extension of time to file is not an extension of time to pay your taxes. Pay the tax you owe as soon as possible to avoid future penalties and interest.

    If you didn’t get a first and second Economic Impact Payment or got less than the full amounts, use Free File to claim the 2020 Recovery Rebate Credit.

    IRS Free File lets you prepare and file your federal income tax online for free. File at an IRS partner site with the IRS Free File Program or use Free File Fillable Forms. It’s safe, easy and no cost to you for a federal return.

    To receive a free federal tax return, you must select an IRS Free File provider from the Browse All Offers page or your Online Lookup Tool results. Once you click your desired IRS Free File provider, you will leave the IRS.gov website and land on the IRS Free File providers website. Then, you must create an account at the IRS Free File providers website accessed via Irs.gov to prepare and file your return. Please note that an account created at the same providers commercial tax preparation website does NOT work with IRS Free File: you MUST access the providers Free File site as instructed above.

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