Benefits Of Filing A Tax Return
Get money back. In some cases, you may get money back when you file your tax return. For example, if your employer withheld taxes from your paycheck, you may be owed a refund when you file your taxes.
Avoid interest and penalties. You may avoid interest and penalties by filing an accurate tax return on time and paying any tax you owe in the right way before the deadline. Even if you can’t pay, you should file on time or request an extension to avoid owing more money.
Protect your credit. You may avoid having a lien placed against you when you file an accurate tax return on time and pay any tax you owe in the right way before the deadline. Liens can damage your credit score and make it harder for you to get a loan.
Apply for financial aid. An accurate tax return can make it easier to apply for help with education expenses.
Build your Social Security benefit. Claiming your self-employment income on your return ensures that it will be included in your benefit calculation.
Get an accurate picture of your income. When you apply for a loan, lenders will look at your tax return to figure your interest rate and decide if you can repay. If you file accurate tax returns, you may get a loan with a lower interest rate and better repayment terms.
Get peace of mind. When you file an accurate tax return and pay your taxes on time, you’ll know that you’re doing the right thing to follow the law.
When It Pays To File
For those few who dont legally have to file, it pays sometimes to send in a return anyway.
This is the case for individuals who dont earn much but might be eligible for the earned income tax credit. This benefit is available to qualified individuals even if they owe no tax, meaning they would get money back from the federal government. Many people think the credit is available only to parents while that is not true, the credit amount is greater for eligible low-wage taxpayers with children.
The IRS also says that most individual taxpayers are due a tax refund. But those taxpayers must send in a Form 1040, Form 1040A or Form 1040EZ to get that cash.
You can check out the filing requirements section of IRS Publication 17 for more details.
Once youve determined that you need to file taxes, your next question is likely to be when do I have to file taxes? This year, the deadline for filing your 2021 tax return is Friday, April 15, 2022. If youre still not sure whether you must file a tax return, ask a tax professional, call the IRS at 829-1040 or make an appointment at your nearest IRS Taxpayer Assistance Center.
Irs Rules Regarding Your Age
As the table above indicates, individuals younger than age 65 must file if they make certain amounts. The earnings threshold amounts go up a bit for individuals 65 and up.
For married couples that file separate tax returns, the earnings target is based on the age of the older spouse.
In most situations, your age for tax purposes depends on how old you were on the last day of the year. But when it comes to determining whether you have to file a return, the IRS says that if you turned 65 on New Years Day, you are considered to be 65 at the end of the previous tax year. The one-day grace period allows you to use the higher-income thresholds to determine whether you must file a tax return.
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Do I Need To File A Tax Return
You may not have to file a federal income tax return if your income is below a certain amount. But, you must file a tax return to claim a refundable tax credit or a refund for withheld income tax. Find out if you have to file a tax return.
Filing For An Extension
Any taxpayer can file for an extension. If you do so before April 18 2023, you will extend your filing deadline to October 16, 2023.
Dont confuse receiving an extension to file your returns with deferring your obligation to pay taxes you owe to the IRS. If you dont pay the taxes due by the filing deadline, you will incur penalties at the rate of 5% of the amount of the tax due for each month payment is not made.
If you are more than 60 days late with payment, youll be assessed a minimum penalty of $100, or 100% of the tax due with the return, whichever is less.
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The above article is intended to provide generalized financial information designed to educate a broad segment of the public it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
Do You Need To File A Tax Return
Here’s how to figure out if you should file a tax return this year:
- Look at your income to see if you made the minimum required to file a tax return
- Decide which filing status is best for you
- If you’re retired, find out if your retirement income is taxable
- Find out if you qualify to claim certain to lower the amount of tax you owe
- Use the Interactive Tax Assistant to see if you need to file
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Penalties For Not Paying Your Taxes
Even if you file an extension to submit your tax return, you must pay any estimated tax you owe by April 15, 2022. If you do not pay your taxes, you will be charged a penalty and owe interest on any unpaid balance.
The penalty for failing to pay your taxes by the due date is 0.5 percent of your unpaid tax for each month or part of a month that your return is late. This penalty is capped at 25 percent of late unpaid taxes. If you file your return on time and request to pay by an installment agreement, the penalty drops to 0.25 percent for each month or part of a month of the installment agreement.
Youre also charged interest on the unpaid balance, which compounds daily. The rate is set each quarter and is based on the federal short-term rate, plus an additional 3 percent.
If you owe taxes and dont file your return on time, youll be charged a penalty for failing to file. This is usually 5 percent of the tax owed for each month or part of a month your return is late. This penalty is also capped at 25 percent.
Access Your Tax Refund Quickly And Safely
If you think you may receive a refund, here are some things to think about before you file your return:
- Electronically filing and choosing direct deposit is the fastest way to get your refund. When using direct deposit, the IRS normally issues refunds within 21 days. Issuance of paper check refunds may take much longer.
- If you already have an account with a bank or credit union, make sure you have your information ready â including the account and routing number â when you file your tax return. You can provide that information on the tax form and the IRS will automatically deposit the funds into your account.
- If you have a prepaid card that accepts direct deposit, you can also receive your refund on the card. Check with your prepaid card provider to get the routing and account number assigned to the card before you file your return.
- You can learn more about choosing the right prepaid card here.
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Who Is Delivery Driver Inc
Delivery Driver Incs website says it is an independent contractor management solution that connects drivers with businesses. However, in 2022, Walmart bought the company and DDI notified its other customers that it would no longer serve them.
Why is this important? If youre working exclusively for Walmart through a company owned by Walmart, theres a chance that some places could find that youre misclassified as an independent contractor.
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 April 19, 2022, if you live in Maine or Massachusetts or April 18, 2022, for the rest of the country.
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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.
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.
» Find a local tax preparer for free:See who’s available to help with your taxes in your area
Other Tax Deductions Not On Schedule C
Delivery Driver Inc drives can also have a few other deductions that wont go on Schedule C.
- Qualified Business Income Deduction: The QBI deduction is usually equal to 20% of your profits. So you only pay income taxes on 80% of what you earn. This is a special deduction that levels the playing field between small businesses and corporations that get a lower tax rate.
- Self-Employed Health Insurance Deduction: If you dont have health insurance through an employer or your spouses employer, you can usually take the self-employed health insurance deduction for insurance that you buy.
- Retirement Savings Deductions: As an independent contractor, you have access to several types of self-employed retirement plans that let you save more for retirement while deducting your contributions.
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School Tuition And Loan Documents
If you are paying university tuition or student loan interest, you may be eligible for a tax credit or deduction. There are two important 1098 forms you will need to claim tuition or loan interest on your taxes.
- 1098-Ttuition statement reports how much you are paying in tuition and fees, plus how much reimbursement you receive in scholarships. You will receive this from your university and need to report it to receive an education credit.
- 1098-Estudent loan interest payment statement reports how much you are paying in loan interest. You will receive this from your student loan provider and need to report it to receive a tax deduction.
Dont miss out on other tax and deductions!
What To Know About The Child Tax Credit
Parents of children under 19 may also be eligible for the Child Tax Credit . Heres how it works for filing 2023 taxes:
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Under the American Rescue Plan, the Child Tax Credit is $2,000 per child for families who qualify this year. To receive the CTC, your modified adjusted gross income must be $400,000 or lower or $200,000 and lower for all other filers.
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Claim the credit on your Form 1040 or 1040-SR. Youll also need to fill out Schedule 8812 , and submit it with your 1040.
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Types Of Tax Credits And Benefits
There are two types of tax credits:
Benefits can help with various living expenses, such as raising children, housing, loss of income and medical expenses.
Read the Canada Revenue Agencyâs General Income Tax and Benefit Guide and Forms Book to learn more about which tax credits you can claim.
With the Ontario Child Care Tax Credit, you could get back up to 75% of your eligible child care expenses. It applies to eligible child care options, including care in centres, homes and camps.
The Low-Income Workers Tax Credit provides up to $850 each year in Ontario personal income tax relief to low-income workers, including those earning minimum wage.
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Are 529 Plans Tax Deductible
A qualified tuition plan, also known as a 529 college saving plan, helps parents sock money away for childrens future education costs while getting tax perks. The funds in the account are available for the beneficiary to use on education-related expenses. There are no federal deductions for contributing to a 529 plan but some states do offer income tax benefits.
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New Mexicos Law Says Every Person Who Has Income From New Mexico Sources And Who Is Required To File A Federal Income Tax Return Must File A Personal Income Tax Return In New Mexico
You must also file a New Mexico return if you want to claim:
- a refund of New Mexico state income tax withheld from your pay, or
- New Mexico rebates or credits.
Nonresidents, including foreign nationals and those who reside in states that do not have income taxes, must file when they have both a federal filing requirement and income from any New Mexico source whatsoever.
A member of the military who was a resident of New Mexico at the time of enlistment and has not changed the state of residency must file a New Mexico income tax return.
The income of members of an Indian nation, tribe or pueblo who work or live on lands outside the Indian nation tribe or pueblo of which they are members are subject to New Mexico income tax.
For additional information refer to the frequently asked questions .
Latest News
Irs Free File Now Accepting 2021 Tax Returns
COVID Tax Tip 2022-16, January 31, 2022
IRS Free File, available only through IRS.gov, is now accepting 2021 tax returns.
IRS Free File is available to any person or family with adjusted gross income of $73,000 or less in 2021. The fastest way to get a refund is by filing and accurate return electronically and selecting direct deposit. This year, there are eight Free File products in English and two in Spanish.
This program gives people an opportunity to file their taxes and claim the 2021 recovery rebate credit, the enhanced child tax credit, the earned income tax credit, and other credits. Taxpayers can also use Free File to claim their remaining child tax credit or any advance payments they did not receive in 2021. By law, the IRS cannot release earned income tax credit and additional child tax credit refunds until mid-February.
Additionally, IRS Free File users can use direct pay or electronic options to submit their tax payment if they owe a balance.
As an alternative, Free File Fillable Forms are electronic federal tax forms available to everyone, regardless of income. Only people who are knowledgeable and comfortable preparing their own tax return should use them.
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W2 Versus 1099 Income
You also should be aware of the different treatment of income reported on Forms W2 and 1099. If your daughter is considered an employee, her income will be reported on a W2 and subject to withholding. However, some employers hire part-time workers as contractors. On the plus side, nothing will be withheld. On the minus side, contractors who have net earnings of more than $400 will owe self-employment taxes, which basically cover Social Security and Medicare taxes. In this case, a contractor has to file a tax return even if no income taxes are owed.