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Financial Calculators and Articles - Answers to Frequently Asked Tax-time Questions

As of 12-26-24

As tax season approaches, many consumers find themselves facing a mix of excitement and anxiety. Whether you’re a first-time filer, a seasoned pro, or navigating a change in your financial circumstances, finding answers to common questions can help you feel more confident and informed as you prepare your tax return.

  1. What Documents Do I Need to Prepare My Taxes?
    Gathering the necessary documents is the first step in the tax preparation process. Common documents include:
     
    • W-2 Forms: These report your annual earnings and the taxes withheld by your employer.
    • 1099 Forms: If you’re self-employed or received other income (like freelance work or interest), you’ll receive various 1099s.
    • Form 1040: This is the main form used for individual tax returns.
    • Receipts for Deductions: If you’re itemizing deductions, keep receipts for eligible expenses, such as medical bills, charitable contributions, and mortgage interest.
    • Investment Statements: If you sold stocks or received dividends, you'll need the relevant forms that report those earnings.
    • Tip: Create a checklist to ensure you don’t leave out any crucial documents.
       
  2. Should I Itemize Deductions or Take the Standard Deduction?
    Deciding between itemizing deductions and taking the standard deduction can significantly impact your taxable income.
     
    • Standard Deduction: For 2024 tax returns, the standard deduction is $14,600 for single filers and married persons filing separately; $21,900 for a head of household; and $29,200 for a married couple filing jointly and surviving spouses.
    • Itemized Deductions: If your total eligible expenses exceed the standard deduction, itemizing may result in a lower tax bill. Common itemized deductions include mortgage interest, state and local taxes, and certain medical expenses.
    • Tip: Use IRS Form 1040 Schedule A to compare the two. Tax preparation software can also help you determine which option is more beneficial.
       
  3. What Credits and Deductions Are Available?
    Tax credits directly reduce the amount of tax you owe, while deductions reduce your taxable income. Some popular credits and deductions include:
     
    • Earned Income Tax Credit (EITC): Designed for low-to-moderate-income working individuals and families, this credit can substantially increase your refund.
    • Child Tax Credit: If you have dependent children, you may qualify for a credit of up to $2,000 per qualifying child.
    • Student Loan Interest Deduction: If you’re paying student loans, you may deduct up to $2,500 of interest paid, depending on your income.
    • Tip: Explore eligibility for credits and deductions on the IRS website or consult a tax professional.
       
  4. What If I Can’t Pay My Taxes on Time?
    If you find yourself unable to pay your tax bill by the April deadline, don’t panic. Here are your options:
     
    • Installment Agreement: You can apply for a payment plan to pay your taxes over time. To avoid penalties, make sure to pay your required installments on time.
    • Offer in Compromise: If you can’t pay your full tax liability, you might qualify to settle for less through an Offer in Compromise. This option requires thorough documentation of your financial situation.
    • Tip: File your tax return even if you cannot pay the tax owed to avoid penalties for late filing.
       
  5. What Are the Deadlines for Filing My Taxes?
    For most individuals, the tax-filing deadline is April 15. However, if that date falls on a weekend or holiday, the deadline is extended to the next business day. Here are some key dates to remember:
     
    • Tax Day: April 15, 2025 (for the 2024 tax year)
    • Extended Filing Deadline: If you file for an extension, the new deadline is typically October 15.
    • Estimated Tax Payment Deadlines: These are generally on April 15, June 15, September 15, and January 15 of the following year if you’re self-employed or have other income.
    • Tip: Mark your calendar with these dates to avoid missing important deadlines.
       
  6. What Should I Do If I Made a Mistake on My Return?
    Mistakes happen, and the IRS provides a way to correct them. If you realize you made an error after submitting your return:
     
    • File an Amended Return: Use IRS Form 1040-X to correct your return. This form can help you claim additional deductions or credits or make corrections to your income.
    • Check Your Refund Status: If your mistake affects your refund, you can check the status on the IRS website.
    • Tip: Always double-check your return before submission and keep copies for your records.

If your situation is complex or you’re unsure about any aspect of your taxes, consulting with a tax professional can provide guidance tailored to your unique circumstances. Happy filing!



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