Finance Resources You Can TrustFinance Resources You Can Trust
  • Home
  • Personal Loans
  • Insurance
  • Mortgages
  • Student Loans
  • Credit Cards
  • Investing
  • Taxes
  • Small Business
What's Hot

9 Consequences of a Bad Credit Score

July 7, 2022

7 credit card perks you might be missing out on

July 7, 2022

These 7 Credit Score Landmines are Hurting Your Credit

July 6, 2022
Facebook Twitter Instagram
Finance Resources You Can Trust Finance Resources You Can Trust
Facebook Twitter Instagram
Subscribe
  • Home
  • Personal Loans

    Step By Step Guide on how to apply for a personal loan with best rates

    June 26, 2022

    LightStream Personal Loans Review – Read This Free 2022 Guide Before Applying

    December 31, 2021

    Upstart Personal Loans Review – Is it for you?

    December 29, 2021

    Avant Personal Loans Review 2022 – A Free Guide On How To Get Approved

    December 23, 2021

    LendingClub loans Review

    December 23, 2021
  • Insurance

    A Comprehensive Guide To Small Business Insurance

    December 22, 2021

    All You Need To Know About Horse Insurance

    December 22, 2021

    7 Significant Differences Between Petplan and Pet Insurance

    December 11, 2021

    Advantages and Disadvantages of Pet Insurance

    December 1, 2021

    Types of Life insurance in the US

    November 29, 2021
  • Mortgages

    What are FHA Loans and what do you need to know about them?

    November 17, 2021

    Mortgage Refinance – A Complete Guide

    November 17, 2021

    What are mortgages, and how do they work?

    November 17, 2021

    How do mortgages work in the USA? A complete guide on US mortgages.

    November 15, 2021

    Everything You Need to Know About Home Equity Line of Credit

    November 13, 2021
  • Student Loans

    Everything You Need to Know About Student Loan Consolidation

    June 24, 2022

    8 Ways to manage student debt after graduation

    June 24, 2022

    What to know about unsubsidized student loans before applying.

    October 21, 2021

    Federal Student Aid. All you need to know about them.

    October 19, 2021

    Student Loans Deferred? What you need to know about deferment.

    October 18, 2021
  • Credit Cards

    7 credit card perks you might be missing out on

    July 7, 2022

    5 Credit Card Myths You Need to Stop Believing

    June 29, 2022

    Credit Cards 101: Get Insights On How They Work

    June 24, 2022

    Secured Credit Cards 101: How They Work and Why You Should Get One

    June 24, 2022

    5 Ways to Avoid Getting Buried in Credit Card Debt

    June 17, 2022
  • Investing

    A Free Guide To 1031 Exchange: What You Need to Know

    June 28, 2022

    What you need to know about high risk investments

    January 2, 2022

    A Complete Guide On The Stock Market: What you should know.

    January 2, 2022

    Why is investing better than Savings? See The Six Reason Why.

    January 1, 2022

    Advantages and Disadvantages of Investing

    January 1, 2022
  • Taxes

    9 Tips on how to choose the right Tax Preparation Attorney

    June 24, 2022

    A comprehensive Guide to HR block online

    June 19, 2022

    The Top 7 Benefits of Hiring a Tax Preparation Accountant

    June 19, 2022

    Everything You Need to Know About Certified Public Accountants

    June 18, 2022

    Everything You Need to Know About Free Online Tax Filing

    June 16, 2022
  • Small Business

    A Comprehensive Guide To Small Business Insurance

    December 22, 2021

    A Detailed Guide On SBA Disaster Loan

    December 8, 2021

    SBA 7a Loan: A Free 2022 Guide On What To Know About It

    December 8, 2021

    Difference Between SBA 504 and SBA 7(a) Loan

    December 8, 2021

    How to Get A Startup Business Loan Without Collateral

    December 8, 2021
Finance Resources You Can TrustFinance Resources You Can Trust
Home»Taxes»Answers to most frequently asked tax questions – Tax FAQ
Taxes

Answers to most frequently asked tax questions – Tax FAQ

Biz GeldBy Biz GeldNovember 12, 2021Updated:January 24, 2022No Comments8 Mins Read
Facebook Twitter LinkedIn Telegram Pinterest Tumblr Reddit WhatsApp Email
Answers to most asked tax questions
Share
Facebook Twitter LinkedIn Pinterest Email

The tax laws in the United States are intricate. This is true whether you’re submitting your taxes for the first time or have decades of expertise as a tax attorney. Even the IRS Taxpayer Advocate Service admits that the tax system’s complexity is the most severe issue that people confront.

People’s minds are full of tax issues when the year is coming to an end. Most people occupy their minds with tax-related things such as;

  • Trusted tax advice.
  • Knowing how to squeeze out more value deductions. 
  • How to avoid fines or an audit.
  • Know how much can they get back on their tax returns.
  • And much more….

We’ve put together answers to the most asked tax questions to assist you with your tax filing. 

Let’s begin!

What makes a tax credit different from a tax deduction? 

Tax credits and deductions can both help you save money on your taxes. Deductions reduce the amount of income subject to taxation, lowering your tax burden. Credits are a decrease in the amount of tax you owe on a dollar-for-dollar basis.

If you have a $30,000 income and a $1,000 deduction, you will not have to pay tax on that $1,000. If you assume a 20% tax rate on the $1,000, the deduction might save you $200. A $1,000 credit, on the other hand, would lower the amount of tax you owe by $1,000. If you owe $3,000 in taxes, you’d owe $2,000 instead and save $1,000.

What is the best filing status for me? 

Depending on the household status, taxpayers are handled differently. You must select a filing status to tell the IRS which regulations apply to you. The five options are single, married filing jointly, married filing separately, head of the home, and qualified widow(er) with the dependent child.

Your tax rate, standard deduction, and eligibility for certain deductions and credits are all affected by your filing status. The IRS offers an interactive tool to assist taxpayers in determining their filing status.

What happens if I don’t file my taxes promptly? 

The answer is contingent on whether you owe the IRS money or anticipate receiving a refund. If you owe money, the penalty for not paying your taxes on time is 5% of the amount owed for each month the return is late, up to a maximum of 25%.

If you file but don’t pay, the IRS will tax you 0.5 percent every month, up to a maximum of 25% if you don’t pay. There is no penalty for not submitting your federal return if you anticipate receiving a tax refund. Still, you are depriving yourself of funds put aside by the IRS for you.

What if I spent the previous year residing in many states? 

Every state has its tax regulations. Things might get tricky if those policies contradict those of another state where you worked remotely. 

Knowing the requirements of each state where you worked is crucial because, depending on where you went and where you came from, you may be forced to pay taxes to two states on the same income.

The most straightforward approach to accomplish this is to go to the website of your city’s or state’s tax agency. This is known as the “Department of Revenue” in most states. However, it is also known as the “Department of Taxation” in certain areas.

When will I be able to receive my money back? 

According to the IRS, most refunds are received within 21 days for individuals who e-filed and had their return instantly deposited. If you submit paper returns, refunds might take up to six weeks to arrive.

Your refund may be delayed if you claim certain credits or deductions. On the IRS “Where’s My Return” page, you may check the status of your refund.

What is the best way to figure out my tax bracket and rate? 

Because the United States has a progressive tax system, not all of your earnings are taxed at the same rate. The range of earnings taxed at specific rates is a tax bracket, whereas your marginal tax rate is the highest tax bracket relevant to your income.

Under current tax law, there are seven tax brackets. You’ll need to know your income to figure out which one you’re in — and what your tax rate is. 

The IRS Tax Rate Schedules for the taxable year can then be used to establish your bracket, marginal tax rate, and potential tax liability.

What exactly is a W-2? 

Suppose you observe that your company deducted income, social security, or Medicare tax from your take-home pay on your paycheck or pay stub. In that case, you’re probably a W-2 employee. 

You will receive a W-2 form from your employer. A W-2 is a pay and income statement that shows the total revenue received from an employer.

Should I itemize or take the basic deduction? 

Taxable income is reduced through deductions. You can choose to itemize your deductions or take a standard deduction. 

The value of certain expenses deductible under US tax law is deducted from your taxable income when you itemize. For example, if you pay mortgage interest, you can remove it if you itemize your deductions.

Compare the amount of the standard deduction to the total value of your itemized deductions to determine which deductions to take. Your itemized deductions might not exceed the average amount in your filing status because the standard deductions have been enhanced due to tax reforms.

What is the amount of income that I am required to pay taxes on?

The IRS defines income as “money, property, or services.” Unless the law explicitly exempts it, all income is taxable, and all taxable income must be recorded on your tax return.

 Even if you don’t pay taxes on it, certain nontaxable income must be disclosed. The IRS Publication 525 explains what income is taxable and what isn’t, and it’s a long list.

All taxable income is not treated equally. Earned income is taxed differently than unearned income since it is subject to Social Security, Medicare, and state and federal income taxes.

Unearned income, such as child support or Social Security payments, is exempt from payroll taxes, subject to federal and state income taxes. In addition, several forms of unearned income are taxed at a lower capital gains rate than your regular tax rate.

What if I’m unable to pay the tax that I owe?

Even if you can’t afford to pay your taxes, you must file a return and make plans to pay what you owe. Interest and penalties will accrue if you don’t file and pay your taxes on time. 

Suppose you can’t pay the whole amount due by the deadline. In that case, the IRS offers a variety of payment options, including installment arrangements.

Even if you engage in a payment arrangement, you will still owe interest and maybe penalties. Payment plan costs and fees differ based on the length of your plan and whether you apply by mail or online.

Who am I allowed to claim as a dependent?

Who am I allowed to claim as a dependent? You may be eligible for additional tax credits and deductions if you have a dependant. However, determining who is and is not a qualified dependant may be difficult. 

The IRS will often allow you to claim a dependant to fulfill the qualifying kid or qualifying relative requirement.

Your kid must be under 19 years old to take the qualifying child test (24 years old if still a student).

There is no age limit for the relative qualifying exam. In either case, the dependant must be a US citizen, US national, US resident, or a resident of Canada or Mexico. They cannot be claimed as a dependant by anyone else, and they cannot file a combined tax return (like a married filing jointly form) for the year in question.

Bottom-Line

The above answers to the frequently asked tax questions might assist you in meeting your tax responsibilities. But you might still have questions as you proceed through the filing process. 

Consider contacting a reliable tax professional who could guide you through the process or do it entirely for you. Most tax professionals or organizations know every possible loophole in the tax system to save you $1000s. 

Suppose you feel comfortable filing your taxes by yourself. In that case, there is no need to consult a tax professional or organization who will charge you for their services.

Share. Facebook Twitter Pinterest LinkedIn Tumblr Telegram Email
Previous ArticleWhat is Tax Relief and how to handle it?
Next Article Mortgages vs Reverse Mortgages
Biz Geld
  • Website

BizGeld provides well-researched and free finance educational content to help you make informed financial decisions. Although we provide unbiased information and recommendations, we are not your typical financial advisor. So before making any financial decision, please contact a professional.

Related Posts

9 Tips on how to choose the right Tax Preparation Attorney

June 24, 2022

A comprehensive Guide to HR block online

June 19, 2022

The Top 7 Benefits of Hiring a Tax Preparation Accountant

June 19, 2022
Add A Comment

Leave A Reply Cancel Reply

About BizGeld
About BizGeld

Discover, save and make sense of anything to do with finance - from how to start a business, invest in property, find the best credit card, and much more.

Facebook Pinterest

Disclaimer: BizGeld strives to keep its information as accurate as possible and up to date. The information we share might be slightly different from that of a financial institution, service provider, or specific product site. All financial products, shopping products, and services are presented without warranty. When you are evaluating offers, please review the financial institution’s Terms and Conditions. Pre-qualified offers are non-binding. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly.

We're social. Connect with us:

Facebook Twitter Instagram Pinterest YouTube
Latest Resource

9 Consequences of a Bad Credit Score

July 7, 2022

7 credit card perks you might be missing out on

July 7, 2022

These 7 Credit Score Landmines are Hurting Your Credit

July 6, 2022
Get Informed

Subscribe to Updates

Get the latest creative news from FooBar about art, design and business.

© 2023 Bizgeld. Privacy Policy | Prequalification Terms | Terms of Use |

Type above and press Enter to search. Press Esc to cancel.