5 Common Tax Questions Answered by an Expert
Paying federal income tax became a permanent thing in the U.S. when Congress ratified the 16th Amendment in 1913. In the years since, tax laws have changed and continue to get more and more complicated.
It’s important to make sure you correctly fill out your tax return and pay as little as possible in the process. This is especially true if you’re filing your tax return on your own.
Do you have some questions about how to do taxes? Filling out and filing taxes can be stressful and confusing. Keep reading to learn five common tax questions answered by a tax expert in terms you’ll understand.
1. Standard Deduction vs. Itemizing
Are you wondering if you should take the standard deduction or itemize your deductions? This depends on your personal situation. If you have itemized deductions totaling more than the standard deduction, you should itemize. If the total is less, you should claim the standard deduction.
The standard deduction for single filers is $12,000; $18,000 for head-of-household; and $24,000 for married couples.
2. Am I Required To Pay Taxes On All Income?
Every dollar you earn is subject to an income tax. If you are a freelancer or are self-employed, you may receive a 1099 tax form from your clients. Some freelancers have the burden of keeping track of income and putting 20-30% of their income aside to pay the taxes at tax time.
If you are going to owe more than $1,000 in taxes, quarterly tax payments are required. These are due on April 15, June 15, September 15, and January 15.
3. What Are The Different Types of Tax Write-offs?
Exemptions and deductions help lower your taxable income. Are you single or filing jointly? Do you have dependents you can claim? These are your exemptions.
Deductions are business expenses you incur during the year like rent on office space, operating costs, electricity, insurance, etc.
Tax credits like the child care credit or IRA contributions reduce your tax bill dollar for dollar. If you receive a tax credit of $1,000, you’ll owe $1,000 less.
4. How Do I Stay Up-To-Date With Tax Law?
When there’s a new administration in Washington, tax laws tend to change making it difficult to keep up. Any tax software or tax website will have the latest changes and updated tips for each new tax year.
5. When Does The IRS Update Refund Status?
Are you wondering about refund status? The IRS processes and updates refund twice a week. Those who file electronically typically receive their refund in 21 days. If you mail in your tax return, expect it to take six weeks after it’s received to get your refund.
Answering Common Tax Questions
If you’re in a situation where you need expert advice, talk to a tax professional who can answer more than the common tax questions. There are also resources and FAQs on the IRS website. When your taxes become too complicated to handle yourself, it’s a good idea to hire a tax accountant to fill out your tax return.
Looking for more personal finance information? Browse through the other articles in that section of our blog. We also cover topics like business & marketing and other guy stuff.
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