How The System Works
If you have not received a form from the Belastingdienst, this does not indicate that you are free of tax obligations. If you have been employed in the Netherlands, payroll tax is withheld from your salary each month. The income tax calculation is as follows:
- Salary 100,000
- Income tax due on salary 42,000
- Less: payroll tax on salary 42,000
- Balance 0
In the above situation, if you were employed for a complete year, you would not have to pay additional income tax. You would not receive a tax form from the authorities and would not be obliged to submit a return. However, you may have incurred tax deductible expenses during the year or could be entitled to a tax refund, and should therefore request a form.
It is important to note that if you received income which hasn’t been taxed, you are legally obliged to request a form and file a tax return.
When To File Taxes: Should You Always Try To Be Early
While the most common advice is to file your taxes as early as possible, is that always the wisest choice? Depending on your situation, it might actually be more beneficial to wait in order to file the most accurate return. Here’s what you need to know to decide when to file taxes.
For information on the third coronavirus relief package, please visit our American Rescue Plan: What Does it Mean for You and a Third Stimulus Check blog post.
Each year, millions of Americans file their tax returns to report their taxable income to the federal government and reconcile their tax bill. In 2019, nearly 72% of filed returns resulted in a tax refund of almost $2,900. Because this money belongs to you and does not accrue interest, filing sooner rather than later to put this money in your pocket makes good financial sense.
For most, the best choice is to file taxes early or at least as soon as you can. This way:
- The IRS may process your return and agree on your tax liability sooner.
- You will know sooner if you owe and have more time to save money.
- You can assess whether you need to file an amended return if you have discovered an error or omission.
Let’s walk through some of the considerations you should make when trying to decide when to file taxes.
Filing To Open An Individual Retirement Account
It might seem a little premature for your child to consider opening an individual retirement account the IRS calls it an individual retirement arrangementbut it is perfectly legal if they have earned income. By the way, earned income can come from a job as an employee or through self-employment.
If you can afford to, consider matching your child’s contributions to that IRA. The total contribution must be no more than the child’s total earnings for the year. That lets your child start saving for retirement but keep more of their own earnings. It also teaches them about the idea of matching funds, which they may encounter later if they have a 401 at work.
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When Your Child Must File
For income above a certain level, the tax rate of the parents will be used. Four tests determine whether a dependent child must file a federal income tax return. A child who meets any one of these tests in 2021 must file:
- If the child only has unearned income above $1,100
- If the child only has earned income above $12,550
- If the child has both earned and unearned income, and the child’s gross income is greater than either $12,550 or their earned income plus $350, whichever is less.
- The child’s net earnings from self-employment are $400 or more
Additional rules apply for children who are blind, who owe Social Security and Medicare taxes on tips or wages not reported to or withheld by the employer, or who receive wages from churches exempt from employer Social Security and Medicare taxes.
Filing Early Lets You Avoid The Rush And Protect Your Identity
Lea Uradu, J.D. is graduate of the University of Maryland School of Law, a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, Tax Writer, and Founder of L.A.W. Tax Resolution Services. Lea has worked with hundreds of federal individual and expat tax clients.
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Reporting Your Child’s Income On Your Tax Return
Your child might be allowed to skip filing a separate tax return and include their income on your return, but only if:
- Your child’s only income consists of interest, dividends, and capital gains .
- Your child was under age 19 at the end of the year.
- Your child’s gross income was less than $11,000.
- Your child would be required to file a return unless you make this election.
- Your child doesnt file a joint return for the year.
- No estimated tax payments were made for the year, and no overpayments from the previous year were applied to this year under your child’s name and Social Security number.
- No federal income tax was withheld from your child’s income under the backup withholding rules.
- You are the parent whose return must be used when applying the special tax rules for children.
Explain to your child the basics of Social Security and Medicare and the benefits of earning credits in these programs.
Include your child’s unearned income on your tax return by using IRS Form 8814. It’s important to note that doing so could result in a higher tax rate than if the child filed their own tax return. It all depends on the amount of unearned income your child reports.
No Crowds And No Penalties
If you mail in your tax return, filing early avoids congestion and a crowded post office. Better to get it done and avoid the hassle.
Filing early gives you time to fully understand any changes to tax law or deal with changes in your life that may alter your filing status. Mistakes from rushing at the last minute can trigger audits that can lead to penalties and interest. Given changes brought on by the TCJA, this point is more important than ever.
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How Do I Prevent Fraud
It’s easy to procrastinate filing your taxes, but putting it off makes you more vulnerable to fraud. If a scammer gets hold of your Social Security number and you haven’t filed a tax return yet, they could easily file a fake one in your name to get a refund.
Scam calls are ubiquitous during tax season. Keep in mind that if the IRS needs to get in touch with a taxpayer, it sends a letter not an email, not a phone call, and definitely not a message over social media. Especially when it’s investigating cases of tax fraud or performing an audit.
Never return a phone call from someone claiming to be with the IRS. Instead, individuals should call the IRS directly at 800-829-1040, and businesses should call 800-829-4933.
The US Department of Justice says the IRS never discusses personal tax issues through unsolicited emails or texts, or over social media. Always be wary if you are contacted by someone claiming to be from the IRS who says you owe money.
If you receive an unexpected and suspicious email from the IRS, forward it to .
Like Last Year The Irs Pushed Tax Day Back This Year Because Of The Covid
In 2020, Tax Day was pushed back from April 15 to July 15 because of the COVID-19 pandemic. This year, the IRS extended the due date again this time to May 17. In addition to giving you more time to file your 2020 federal income tax return, the Tax Day postponement gave the tax agency more time to adjust its computer systems and forms to account for tax changes made by the American Rescue Plan Act most notably, the $10,200 exemption for unemployment compensation received in 2020. .
If you’re the victim of certain storms earlier this year in Alabama, Kentucky, Louisiana , Oklahoma, Tennessee, Texas or West Virginia, you have even more time beyond the Tax Day deadline to file your 2020 federal income tax return .
If you have a federal tax refund coming, you could get paid in as little as three weeks. In the past, the IRS has issued over 90% of refunds in less than 21 days. To speed up the refund process, e-file your 2020 tax return and select the direct deposit payment method. That’s the fastest way. Paper returns and checks slow things down considerably.
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Do You Even Have To File Taxes
Even if you dont have to file taxes, you might want to do it anyway: You might qualify for a tax break that could generate a refund. So give tax filing some serious consideration if:
You qualify for certain tax credits.
Access To Preparer And Information
Your certified public accountant or other tax preparer will not be as busy in January or February as in April. Early access means your CPA will have additional time to consider your situation more carefully and help you with your return.
If you are in the process of buying a home or going back to college, it will require information from your recent tax returns. Preparing your taxes early will provide you with the most up-to-date information available.
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The Irs Recommends Filing Your Taxes Early
According to the IRS, you should file your taxes early so you can avoid delays when waiting for your tax refund. This means youll get your tax refund the fastest way possible!
With an estimated 153 million tax returns expected to be filed, 80% of which will be submitted through online tax software, its always better to start as soon as possible and avoid any system downtime or painful delays.
Negotiate Your Tax Bill
If your tax assessment is too high, you may be able to negotiate a better deal. Penalties may represent 25% of what you owe to the IRS. Getting these removed can make a real difference. File Form 843 to request an abatement of taxes, interest, penalties, fees, and additions to tax.
You might consider a Partial Payment Installment Agreement where the IRS agrees to accept less than the total you owe. The IRS will only agree to a PPIC if it’s clear that the monthly payments you can make will not cover your total taxes due for many years.
Another option to reduce your total tax liability is an offer in compromise . If the IRS accepts an OIC, it acts as an agreement between a taxpayer and the IRS to settle a taxpayer’s tax liabilities for less than the full amount owed. If you can fully pay your liability through an installment agreement or other means, you won’t generally qualify for an OIC.
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S You Can Take Now To Make Tax Filing Easier In 2022
Use online account to securely access the latest information available about your federal tax account and see information from your most recently filed tax return on IRS.gov.
- View the amounts of the Economic Impact Payments you received
- Access Child Tax Credit Update portal for information about advance Child Tax Credit payments
- View key data from your most recent tax return and access additional records and transcripts
- View details of your payment plan if you have one
- View 5 years of payment history and any pending or scheduled payments
Act now if you need to create an account.
Organized tax records make preparing a complete and accurate tax return easier. It helps you avoid errors that lead to processing delays that slow your refund and may also help you find overlooked deductions or credits.
Wait to file until you have your tax records including:
- Form 1099-INT if you were paid interest
- Other income documents and records of virtual currency transactions
- Form 1095-A, Health Insurance Marketplace Statement, to reconcile advance Premium Tax Credits for Marketplace coverage
- Letter 6419, 2021 Total Advance Child Tax Credit Payments to reconcile your advance Child Tax Credit payments
- Letter 6475, Your 2021 Economic Impact Payment, to determine whether you’re eligible to claim the Recovery Rebate Credit
Remember, most income is taxable. This includes:
Failure To File Your Tax Returns For 2 Or More Years
If you fail to file your tax returns for 2 years or more, you may be issued with a summons to attend Court. On conviction in Court, you may be ordered to pay:
Failure to pay the penalty or fine to the Court may result in imprisonment of up to 6 months.
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How Tax Brackets Work
How much tax you must pay begins with your total or “gross” income from all sources. You can then claim any deductions to which you’re entitled. These subtract from your gross income to arrive at your taxable income.
The federal government uses a progressive tax system, which means that the higher your taxable income, the higher your effective tax rate will be. These rates are determined by tax brackets.
If your income is greater than a certain amount, you will be taxed at a certain percentage. In 2022, the tax brackets are as follows:
The IRS adjusts these taxable income amounts annually for inflation.
Disadvantages And Advantages Of Filing As Married
Your eligibility for deductions and benefits will change with the change of marital status. For example If both of you sold a home to buy your home together, only one of the sold properties may be immune from taxes. You may have to pay capital gains tax on assets earned from one of the sales.
Transfers are another way to lower the tax payable overall for a couple. For example, if your spouse attended university and doesnt require the entire tuition credit to lower his or her tax payable, you may be able to claim part of this expense on your own return. Other potential transfers include the disability amount, the pension income amount, and the age amount. Similarly, if your partners income is below a certain threshold, you may claim an additional tax credit. You can pool your medical expenses and apply the deduction to the tax return of the partner who can use it more effectively. Charitable donations can also be combined. Learn more about transferable tuition amounts in the CRA link.
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Affordable Care Act Premium Credit Claim
If you have health care coverage as required by the Affordable Care Act, also known as ACA or Obamacare, you might need to file a return.Specifically, this will be the case if you qualified for federal help in buying your health care coverage through the health insurance marketplace or exchange. If advance payments of the ACA premium tax credit were made for you, your spouse or a dependent who obtained such marketplace medical coverage, that amount must be reported by filing a Form 1040 tax return and Form 8962, Premium Tax Credit.
This will ensure that you got the appropriate tax credit in advance. If you received too much premium help, youll have to repay it when you file your return. If you did not get enough, you can collect the extra when you file.
File Your Taxes With Nyc Free Tax Prep
The deadline to sign up for Advance Child Tax Credit payment was November 15, 2021.
You can still file your 2020 tax return for free with NYC Free Tax Prep if you meet income requirements. Review checklist of documents you need to file your taxes. NYC Free Tax Prep providers can help you claim important tax credits including the Child Tax Credit. Note: If you owe the government money, be aware that late filing and/or late payment penalties may apply.
Please also monitor this webpage as we plan for the 2022 tax season.
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This Guide Can Help Your Child Learn The Process And Build Good Habits
As your child moves toward adulthood, you face several milestone decisions that involve, in part, a desire to help your child become more independent and responsible. But one milestone you may not anticipateeven though it will be part of your child’s growing-up experienceis the filing of that first income tax return in their name.
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