Understand How Your Taxes Are Determined
The government decides how much tax you owe by dividing your taxable income into chunks also known as tax brackets and each chunk gets taxed at the corresponding tax rate. The beauty of this is that no matter which bracket youre in, you wont pay that tax rate on your entire income.
The progressive tax system in the United States means that people with higher taxable incomes are subject to higher federal income tax rates, and people with lower taxable incomes are subject to lower federal income tax rates.
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Filing On Your Childs Behalf
Of course, there is a way to file the taxes yourself instead of making your child do that. Its called filing taxes on your childs behalf, and its exactly what it sounds like. Essentially, you claim the child as your dependant and file all their taxes by disclosing their income thoroughly on your tax sheet. Usually, parents of disabled children do that to help the child with their taxes. Other parents might also do the same thing if they feel that their child is not yet ready to understand the complications of tax paying.
Coronavirus Unemployment Benefits And Economic Impact Payments
You may have received unemployment benefits or an EIP in 2021 due to the COVID-19 pandemic.
Unemployment compensation is considered taxable income. You must report unemployment benefits on your tax return if you are required to file.
If you received the EIP, you do not need to report it as income whether youre required to file a tax return or not. If you did not receive some or all of your stimulus payments, you may claim missing stimulus money that you are owed by filing for a Recovery Rebate Credit on your 2021 return.
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Dont Despair If Youve Fallen Years Behind On Your Tax Filing
It starts with missing one year. Tax time rolls around and youre going through some things so you put it off or it slips your mind. Second year it happens again. It starts to bother you, but life is hectic. Third year: now its becoming a habit not to file. Every now and then, randomly, you remember and it bothers you, but its never quite the right time to tackle whats starting to look like a huge job.
Gradually, not filing becomes a habit, the unfiled years are piling up and getting more intimidating, and the feeling of pressure and guilt is something you avoid thinking about. But it never quite goes away.
Falling a few years behind happens to plenty of Canadians, most of whom sincerely want to do the right thing. If youre in this position youve got some work ahead of you, but I promise its going to be all right. But youll have to do some work.
What If I Can’t Pay My Tax Bill
If you can’t afford to pay your tax bill in full on the deadline, don’t pull out your credit card or ignore the situation.
The IRS offers reasonable payment plans at much lower interest rates than most banks. You may even be able to settle the bill for less than you owe, called an offer in compromise, or request a deferment until you can make a payment. Offers in compromise and requests for deferment require additional paperwork and must be approved by the IRS.
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Who Can Be Claimed As A Dependent
There are some basic requisites for claiming a child on a parents tax return. The child must be your son, daughter, adopted child, stepchild, eligible foster child, sibling, half-sibling, step-sibling, or offspring of any of these and have a Social Security number.
They must be under age 19 at the end of the tax year, or under age 24 if a full-time student. There is no age limit if they are permanently and totally disabled. The child must live with you for more than half the year in the US and if married, not file a joint return with their spouse.
However, just because you claim your child as a dependent doesnt mean that they dont have to file a tax return.
#IRSFreeFile is now available, offering you tax software to file your 2021 #IRS tax return for free.
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Who Should File A Tax Return
Most U.S. citizens and permanent residents who work in the United States need to file a tax return if they make more than a certain amount for the year.
You may want to file even if you make less than that amount, because you may get money back if you file. This could apply to you if you:
- Have had federal income tax withheld from your pay
- Made estimated tax payments
- Qualify to claim tax credits such as the Earned Income Tax Credit and Child Tax Credit
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Reap The Benefits Of Filing Taxes As A Student
A lot of students dont see the point in filing their taxes while they are in school. They dont make enough money to owe the government any money so they figure they dont need to file their taxes.
But they are missing out!
When you are a student, taxes are your best friend. Seriously. As a student, you may not make enough money with your student job to owe the government any money. But if you paid taxes on each of your pay cheques, you may get a refund when you file your taxes and it could help your future tax returns too.
Just by filing your taxes, you could get all of this :
- Education tax credit
Full time student $65/ monthPart-time student $20 month
2. The government will just give you money every couple months
It can be hard to buy things when you are a student because you dont have any money. Thats why the government created a GST/HST credit program to help low- and modest-income Canadians handle the cost of taxes on all the stuff you buy. But you only way you qualify for this credit if you file your tax return! So get on it because if you do qualify, the government will send you a cheque in the mail or a directly deposit the credit into your bank account four times a year! How sweet is that?
3. You can help your future self save for retirement
File taxes now = refund now + RRSP room for future
When Does A New Business Have To Start Filing Income Tax Returns
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Heres an important business tax preparation question: If you have recently started a business, when are you required to begin filing income tax returns? Lets answer this question by considering a typical example.
Lets say you and your two business partners form an LLC in November 2010. You dont have a profit during the last two months of the year, as you are just laying the foundations, assembling your team of advisors and doing other preliminary activities. You dont have any sales yet, but you do incur some expenses to get things going.
You do apply for and receive a federal tax identification number from the IRS, and you also get a tax ID from your state.
Do you have to file an income tax return for this first year, even though the business was only in existence for the last two months of the year and had no profit?
The answer is Yes.
Heres why. Since you have an IRS-issued federal tax ID, you are in their system and the IRS will be expecting you to file an income tax return for 2010. Since there are three owners , by default the LLC would be taxed as a partnership , so the business should file Form 1065 by April 15, 2011, or file an extension on Form 7004. If the LLC files the extension, then the LLC has until Sept 15, 2011 to file Form 1065.
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What Is Income Tax
Income tax is money paid to the government on income earned. In Canada, income tax is payable to the Canada Revenue Agency . A tax year is always January 1 to December 31 for individual tax. How much income tax is owed varies from person to person. Some individuals have taxes withheld at the source reducing their bill, while others dont. Income, employment status, and available deductions are all factors that affect income tax.
Helping Your Teen File Their Taxes
The first step as a parent in helping their child file taxes is to verify how they have filed and make sure they have everything in order. Your child needs to have the following things in order before sending in their taxes.
- Have a valid social security number
- They should not file a joint return even if they are married.
- They should legally be your son, daughter, adopted child, stepchild, eligible foster child, sibling, step-sibling, or offspring of any of these.
- They must be under the age of 19 when they file for taxes or under the age of 24 if they are a full-time student. This rule is exempted if your child is disabled permanently or totally.
- Have been living with you for at least half a year before you file your taxes
Helping your teen understand all the above points and making them file their very own taxes would be an essential part of getting them to be an adult on their own. This is generally not taught in schools, so it is essential to teach children how to file taxes as a parent.
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How Do I File Taxes
You can file online yourself, potentially for free, or visit a tax professional.
If your adjusted gross income was less than $73,000 in 2022, you might qualify to prepare and file your federal return, and maybe your state return, at no cost through one of the IRS partners, regardless of how complicated your tax situation is. Also, most active duty military qualify for free filing.
If your income exceeds $73,000, or you’re not interested in the platforms offered in partnership with the IRS, check out our list of the best tax software to use this year.
After filing out the required forms, your tax preparer will calculate whether you owe additional income tax or you’re getting a refund. If you don’t pay what you owe by April 18 , penalties may apply.
Who Is Required To File An Income Tax Return
If you are new to Canada or if you are just entering the workforce, you may be wondering if filing a Canadian Income Tax return is a necessity, and if so, when do you have to file your first tax return?
The Canada Revenue Agency does require annual filing for most citizens but there are exceptions, so lets have a look at who is required to file a Canadian T1 General tax return and when.
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How Do Social Security Benefits Impact Filing Requirements
Now that you know your gross income is a primary factor in whether you have to file taxes, you may be wondering how Social Security benefits factor in.
In some cases, you wont need to pay taxes on your Social Security, but it all comes down to your combined income.
Combined income includes:
-
Half of your Social Security income
-
Your tax-exempt interest
Youll need to pay taxes if your combined income is greater than $25,000 as an individual or greater than $32,000 if married filing jointly. However, you wont pay taxes on more than 85% of your Social Security benefits. How much of your Social Security income is subject to tax will depend on your combined income.
If youre filing as an individual and your income is between $25,000 and $34,000, 50% of your benefits are taxed0. If your income exceeds $34,000, 85% of your benefits are taxed.
If youre filing a joint return, 50% of your benefits are taxed if your income is between $32,000 and $44,000. If your income exceeds $44,000, 85% of your benefits are taxed.
For each year you receive Social Security, you should receive a Form SSA-1099 from the Social Security Administration. This form is for tax-filing purposes and outlines how much you received in Social Security benefits for the year.
Do I Have To Claim My Child As A Dependent
My 19 year old college student daughter lived with her brother for most of 2020 while she was at school. We lived in SC, and she stayed in NC and only came home occasionally. Her DL and residency stayed in NC and never switched to SC when we moved. Her job was impacted by Covid-19, and because of that she received over $15K in income and now owes taxes . We did not provide more than half of her income â her schooling was paid for , and between her brother and herself, they pretty much took care of themselves. My question â do I have to claim her as a dependent? If I donât, sheâll end up not owing money, but if I do she owes quite a bit. The kicker is that if we donât claim her as a dependent, for some reason TT now shows that she would be eligible for the stimulus money.
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What If Ive Been Garnisheed
A garnishee is a situation where your employer or payer is legally required to forward part or all of your income to the government before it gets to you. CRA sometimes resorts to this if their requests for tax returns and/or amounts owing repeatedly go ignored. The garnishee is applied against taxes owing even if those taxes are inflated by a notional assessment.
Be aware that you are in fact getting credited for all the amounts CRA is withholding from your pay. So its not all bad: you are actually paying off your tax bill, if involuntarily. Meanwhile, if you later file a tax return showing less tax owing than theyve garnisheed, youll get it back.
Other Situations That Require Filing A Tax Return
In addition to requirements based on age, your filing status and income, and the rules regarding the Affordable Care Act and self-employment income, there are several other situations that require you to file a tax return.
For example, if you owe any special taxes, such as the alternative minimum tax extra taxes on qualified plans like an IRA household employment taxes for employees like nannies, housekeepers or gardeners or tips you didnt report to your employer, then you need to file a federal return. You must also file if you had write-in taxes that might include taxes on group term life insurance or health savings accounts. In addition, you have to file if you have recapture taxes on the profitable sale of an asset.
Another instance which requires you to file a return is if you or your spouse received distributions from a health savings account, Archer MSA or Medicare Advantage MSA.
If you worked for a church or a church-controlled organization that is exempt from paying Social Security and Medicare taxes and you had wages of $108.28 or more, youre required to file a return.
Finally, if you have a tax liability and are making payments under an installment agreement, you must file a return.
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How Can I Reduce My Taxable Income
If youre looking to reduce your taxable income to the point where youre not required to file taxes, there are a number of steps you can take.
One way to reduce taxable income is by topping up your retirement savings with traditional IRAs and 401s, up to the maximum allowable contribution. Contributions to Health Savings Accounts and Flexible Spending Accounts are another way to shrink your taxable income. As a business owner, qualified expenses can also help you reduce your taxable income.
You could potentially earn thousands of dollars before paying taxes. However, even when your income falls below the cut-off level and you do not have to pay taxes, you need to file taxes to get a refund check.
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When Do You File Your Return
Personal income tax return filings and payments are due on April 30, 2022. If you are self-employed, you have until June 15, 2022, to file and pay.
Any contributions made to an RRSP reduce your taxable income by the same amount. If youd like to take advantage of this, you have until March 1, 2022, to make a contribution and still report the deduction on your 2021 taxes.
The CRA opened NETFILE on Feb 21, 2022.
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Tax Credits For Unemployed
One benefit of being unemployed is that you may be eligible for the Earned Income Tax Credit. When filling out your income tax return for the unemployed tax season, though, youll need to have earned at least $1 in order to qualify, and unemployment benefits dont count. You also wont be able to file separately if youre married and want to request the EITC.
The EITC gives you between $519 and $6,431 in refundable tax credits on your return, depending on your income level and the number of dependents you have. Since its refundable, that means that even if you dont owe taxes, youll get that money back in the form of a tax refund. If you dont have children, the maximum youll receive is $519. Households with three children or more can be eligible for as much as $6,431, as long as their household income falls below $54,885, or $49,195 for heads of household and single filers.
If you have children, you may also qualify for the Child Tax Credit, which issues $2,000 per qualifying child as long as your household income falls below $200,000, or $400,000 for married couples filing jointly. Up to $1,400 of that amount is refundable.
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