Here’s an exhaustive list of solutions to usual tax-related worries.
In this article:
- Do I Need to File a Federal Tax Extension?
- What Happens If I Miss the October Tax Extension Deadline?
- Why or Why Not Should I Efile an Extension?
- Should I File an Extension If I Cannot Pay the Tax I Owe?
- What Happens If I Miss the Tax Deadline?
- If I Filed an Extension, When Do I Pay the Taxes That I Owe?
- How Will the New Tax Law Affect Me?
- Will Social Security Be There for Me?
- How Do I Make the Federal Bonus Depreciation Adjustment?
- What If I Haven’t Filed My Small Business Tax Return?
- Who Is Required to File a Corporation Franchise Tax Return?
- How Can I File an Extension for a 709 Return?
- Should I Get A Long-Term Care Policy?
- What’s New For Employers for Tax Year 2019?
- What Is the Tax Rate on Stock Options?
- Do I Have to File an Extension If I Am Getting a Refund?
- How Much Help Do I Really Need with My Taxes?
- When Is the Deadline to File My Tax Return?
- What Are the Fees for Paying Late?
- What Extensions Are Available for Those Individuals Serving in a Combat Zone?
- What Income Goes on Line 16 of Form 1040?
- How Long Does It Take to Get the Refund Back?
- Should My Dependent File a Return?
- Can VA Reduce My Disability Rating?
- Can My Extension Request Be Denied?
- If I Have an Extension, Will This Extend the Time to Pay Any Tax Due?
- How Do I Deal with Back Taxes?
A List of Pressing Tax Concerns and What to Do About Them
Do I Need to File a Federal Tax Extension?
Taxpayers might need to file a federal tax extension for different reasons. Sometimes the reason is as simple as incomplete documentation.
Regardless of your motivation, there are only two ways to file a federal tax extension.
You can file your request via the IRS website. There you will be prompted to accomplish Form 4868.
As an alternative, you can also file your request using software such as TurboTax. For state return extension, you need to refer to your state’s specific guidelines.
What Happens If I Miss the October Tax Extension Deadline?
Unpaid back taxes are subject to penalties and interest. This means that every time you file for a tax extension, your base tax debt will incur additional charges.
For every month a tax debt is unpaid, it is charged at least a 0.5% penalty. This means that if you owe $10,000, you incur a $50 charge each month you are unable to settle your tax debt.
These penalties are on top of the existing 6% interest rate. These penalties and interest are the reasons why it is best to avoid delaying tax payment.
However, certain circumstances allow a tax filing extension beyond October. These allowances cover members of the military, individuals currently deployed in a combat zone, and citizens presently living outside the United States.
Why or Why Not Should I E-file an Extension?
The IRS offers convenient means for taxpayers to file a tax extension for free. This is via the agency’s Free File program.
Alternately, you can use independent software such as TurboTax or TaxAct. Both of these software options grant specific services for free as well.
E-filing your tax extension request affords you several advantages. The most obvious of which is you are able to save time.
Also, you get to save on paper and postage costs. You can usually expect receipt acknowledgment within a few hours of electronically filing your request.
Lastly, these software platforms provide helpful features, such as tax liability estimates.
Should I File an Extension If I Cannot Pay the Tax I Owe?
Yes, you definitely should. But keep in mind that filing for an extension does not mean the IRS lets you off the hook in the months corresponding to your requested extension.
Interest and penalties still apply to your tax return. These charges do add up and might complicate your finances even more.
This is why filing your tax return within the deadline still remains the best recourse. You can pay as much as you can or apply for tax relief options offered by the IRS.
Available tax relief options include installment agreement plan, offer in compromise, and currently not-collectible.
What Happens If I Miss the Tax Deadline?
If you do not owe back taxes and miss the tax deadline, there is no need to worry. However, if you are eligible for a refund, you will also miss it.
The IRS will not send you your tax refund until you file your tax return.
If you have existing tax debt and miss the deadline, you need to file for a tax extension. You might also want to pay the agency a rough estimate of what you owe.
Making the aforementioned payment exempts your record from incurring exorbitant interest and penalties. Make sure not to miss the October 15 deadline for extended tax filing.
If I Filed an Extension, When Do I Pay the Taxes That I Owe?
Again, it is worth noting that filing for a tax extension allows you to delay the filing process and nothing more. It does not delay your scheduled payment.
You are still required to settle any tax debt on the April 15 deadline. Yes, the IRS can extend your tax return filing for six months, but they will also subject your tax debt to penalties and charges.
However, filing for a tax extension is better compared to not filing your tax return at all. Doing the latter might lead to your receiving failure-to-file penalties.
Failure-to-file penalties can amount to as much as 25% of your outstanding tax debt.
How Will the New Tax Law Affect Me?
December 22, 2017 saw the signing of a new tax bill. It was called the Tax Cuts and Jobs Act (TCJA) bill, which will affect upcoming tax returns.
The new tax bill includes 7 tax brackets. The lowest bracket is 10%, covering single filers earning less than $9,525 and joint filers earning less than $19,050.
The highest bracket is at 37%, covering earners of at least $500,001 (single filers) and $600,001 (joint filers). The new tax bill has also increased standard deductions.
Single filers’ standard deductions now amount to $12,000. For joint filers, it’s at $24,000.
Will Social Security Be There for Me?
Sometimes, worrying about tax concerns quickly leads to worrying about Social Security. If you relate to this statement, rest assured that Social Security has got you covered, so long as certain taxes are continuously paid.
Social Security is funded by two sources. These include Federal Insurance Contributions Act Tax (FICA) and Self-Employed Contributions Act Tax (SECA).
While some fear mongers chronically tout Social Security fund depletion, the truth of the matter is there will be enough collected and saved resources for everyone.
In fact, since the 1980s, Social Security collections have historically been bigger than payouts.
How Do I Make the Federal Bonus Depreciation Adjustment?
The bonus depreciation program of the IRS was amended in 2017. One of the major changes was the increase of deduction for IRS qualified property from 50% to 100%.
Another update made was the extension of the deduction to property acquired under specific condition. Previously the law only covered assets bought new.
To compute your bonus depreciation, multiply your acquired asset’s base cost to the bonus depreciation rate (100%). For example, if your tax rate is 21% and you acquire an asset worth $100,000, your deduction will amount to $21,000.
Bonus Depreciation Definition: A tax incentive allowing businesses to automatically deduct a specific percentage of the basic cost of a qualified asset, such as machinery.
What If I Haven’t Filed My Small Business Tax Return?
If you miss the April filing deadline, you can always apply for a tax extension. This affords you six more months to complete essential documentation.
The IRS relies on your provided financial records to confirm your earnings and deductions. Failure to file your tax return results in various unfavorable situations.
Keep in mind that the IRS consistently pursues delinquent taxpayers. They do this by imposing fines, back taxes, interest, and penalties.
In worst cases, the agency can even attach a lien or a levy to your property. It is in your best interest to stay up to date with your tax responsibility.
Who Is Required to File a Corporation Franchise Tax Return?
All LLCs, corporations, and partnerships must file their corporate franchise tax return. This law is imposed by the state in which a business operates.
Corporate franchise tax must not be confused with corporate income tax. The latter taxes a business’ acquired profit.
Meanwhile, the former taxes a business for the privilege of having been provided a license to operate in a specific location.
How Can I File an Extension for a 709 Return?
IRS Form 709 corresponds to the United States Gift (and Generation-Skipping Transfer) Tax Return. If you are a U.S. citizen or resident who provided a gift amounting to more than $15,000 to a recipient who’s not your spouse, you must file a 709 return.
There are exemptions to this rule. One is when you donate to a political organization.
If you have yet to complete the required documents and need more time, you can always file for a 709 return extension. Those who have already applied for an income tax return extension no longer need to file a separate request to extend their 709 return because it is already covered by the former.
Meanwhile, if you did not file for an income tax extension, you can request for a dedicated 709 return extension by accomplishing Form 8892.
Should I Get A Long-Term Care Policy?
Long-term care insurance is a smart option for taxpayers. However, it is not for everyone.
These policies are best for individuals with large enough nest eggs that disqualify them from government-funded Medicaid.
What’s New For Employers for Tax Year 2019?
Payroll taxes remain mostly the same as last year, except for some minor adjustments. For example, withholding allowance has been increased to $4,200 from last year’s $4,100.
Also, the wage base for Social Security has been increased to $132,900 from last year’s $128,400. Certain adjustments have also covered fringe benefits such as adoption assistance, transportation privileges, and health savings accounts (HSAs).
What Is the Tax Rate on Stock Options?
Stock options are benefits whereby employees are given the chance to purchase company stocks at a discounted price. These stocks can come in the form of either non-qualified stock options (NQSOs) or incentive stock options (ISOs).
NQSOs are subject to both acquisition and sales tax. The tax rate applied is the same as the normal income tax rate, plus Social Security and Medicare taxes.
On the other hand, ISOs are only taxable once you decide to sell them. Rules governing capital gains tax cover ISOs.
Do I Have to File an Extension If I Am Getting a Refund?
Technically, you don’t have to. But it’s still best to do so.
Filing for an extension protects you from late-filing penalties should the IRS decide you owe them back taxes after reevaluating your records. Also for most state extensions to be granted, filing for federal extension is a prerequisite.
Lastly, filing for an extension is free and simple.
How Much Help Do I Really Need with My Taxes?
The answer to this question depends on your tax return’s level of complexity. If yours is pretty simple and straightforward, by all means file your tax return on your own using one of the free filing software.
Meanwhile, if you are a member of the gig economy, it might work in your favor to enlist the services of paid-for filing platforms priced at under $100. TurboTax should be at the top of your options.
For those with complicated tax returns, the best recourse is to hire a tax expert whom you can work with on a face-to-face basis. These professionals know everything there is to know about the intricate process involved in tax filing, from the forms you need to tax relief options.
When Is the Deadline to File My Tax Return?
The United States’ Tax Day is on the 15th of April. This deadline covers both IRS income tax returns and most state returns.
Keep in mind that in some states, the deadline for filing returns falls on a later date.
What Are the Fees for Paying Late?
If you pay your tax debt beyond the deadline, you will be charged with a 0.5% penalty fee for each month that your tax debt stays unpaid.
The failure-to-pay penalty has no maximum amount. Therefore, these penalties accrue until your tax debt is paid in full.
On top of failure-to-pay penalties, your tax debt also incurs a 6% interest for each month it stays unpaid.
What Extensions Are Available for Those Individuals Serving in a Combat Zone?
The IRS defines “combat zone” as a conflict area, declared by the U.S. president, wherein the country’s armed forces are deployed. Military personnel assigned to these areas automatically receive tax filing and payment extension.
Armed forces members working in combat zones are allowed up to 180 days of tax filing and payment extension from the day their combat zone service is terminated. Those hospitalized are given 180 days of extension from the last day of continuous medical care.
These allowances extend to military spouses in case of joint filers.
What Income Goes on Line 16 of Form 1040?
Line 16 of IRS Form 1040 is dedicated to income from annuities and/or pension. It has two subcategories: 16A and 16B.
You declare all received annuities and/or pension on 16A. Meanwhile, on 16B, you specify the taxable parts of these sources of income.
Annuities and/or pension include 401(K) plans, 403(B) plans, Federal Employees’ Retirement System (FERS), Civil Service Retirement System (CSRS), Governmental 457(b) plans, thrift savings plans, and foreign pension plans.
How Long Does It Take to Get the Refund Back?
The answer to this question depends on your chosen mode of tax return filing.
If you e-filed your tax returns, you can expect refund receipt 21 days after IRS e-file acceptance. Meanwhile, for mailed returns, the process can take between six and eight weeks.
Should My Dependent File a Return?
Dependents with earned or unearned income may be required to file their own tax return.
The IRS defines earned income as payment for work a person performs. This may include scholarship income.
Unearned income covers the likes of survivor annuities, capital gains, and interest, among others. In most cases, the minimum self-employment income requirement is $400.
Can the VA Reduce My Disability Rating?
People who have received a disability rating from the Veterans Administration (VA) need not worry about their rating being reduced or terminated. This can only happen if the VA has proven that you’ve seen sustained improvement.
VA ratings that have existed for 10 years no longer face the risk of getting terminated.
Can My Extension Request Be Denied?
All taxpayers are entitled to having their tax return filing extended for up to six months. This means that no extension request gets rejected, so long as said request is properly filed.
If I Have an Extension, Will This Extend the Time to Pay Any Tax Due?
No. The IRS allows you to file your tax return on a later date. For six months you get to prepare your tax return as best as you can.
However, your outstanding tax debt’s payment schedule stays as is. This means it accrues penalties and interest for late payment.
How Do I Deal with Back Taxes?
Call the IRS for concerns regarding back taxes. Better yet, speak to a tax professional.
A tax expert will be able to adequately and clearly explain tax relief options available to you. Depending on your specific circumstances, you might be eligible for an offer in compromise, a non-collectible status, or an installment agreement.
All your tax worries have a corresponding solution. Sometimes, there are even multiple solutions and it is only a matter of choosing the best and most viable option.
Please share any tax worries not discussed above in the comments section below.
If you owe back taxes, visit taxreliefcenter.org for more information on tax relief options.
- Avoid Forfeiting Your Past Tax Refund
- How To File Back Taxes
- Where Is My Federal Tax Refund? What To Do If You Don’t Receive It