Here are some FAQ related to taxes:
What Income am I to Pay taxes on?
Uncle Sam’s definition of income is money, services, and properties. All income can be taxed, except there is an exemption on it by law. So you must report all taxable income on your tax return. You should also report some nontaxable income even though there will be no tax on it.
You will get details of this on IRS Publication 525. Every taxable income is not treated the same way.
You will not pay payroll taxes on unearned income such as Social Security benefits, while there will federal and state income tax. There are also some unearned incomes taxed at a lower rate compared to the normal tax rate.
Which Filing Status am I going with?
The treatment of taxpayers differs when you consider the household status. Your filing status determines the rules that will bind you. Filing status exists in five categories:
Single
Married couples filing jointly
Head of household filers
Married filing separately
Qualifying widow that has dependent child
Your filing status will determine other things like the standard deduction, tax rate, qualification for some credits and deductions, etc. You can get help from a tool on the Uncle Sam website to know your filing status.
What are my Tax bracket and tax rate?
A progressive system determines the US tax system, which means that all income will not be taxed at the same rate. The tax bracket is the range of income taxed at a definite rate, while the marginal tax rate is the highest tax bracket that applies to your income.
The US tax system currently has seven tax brackets. Your income is a significant determinant of your tax rate and your tax bracket. There is a Tax rate schedule from the IRS to help you know your tax bracket, your marginal tax rate, and what you owe as tax.
What tax form can I use?
The 1040 tax form has replaced the three previous tax Forms 1040, 1040A, and 1040EZ.
The simplified and combined 1040 form is what you will use to file your 2020 federal income tax. It uses a building block system to make the filing process easy. Although if your filing situation is complicated, you will need additional tax forms known as schedules.
Is there a difference between a tax form and a tax credit?
The idea behind a tax form and a tax credit is to reduce the overall amount you pay as tax. The credit reduces the dollar amount of tax you owe, while deductions bring down the portion of the income you will be taxed on.
For someone with an income of $50,000 who got a deduction of $5,000, this means that the $5,000 will be excluded from tax. Assuming a tax rate of 20%, this deduction will save you up to $1000 on taxes.
On the other hand, if you get a credit of $5,000, it will reduce your total tax amount by $5000. With this, if your tax is $12,000, you will only owe $7,000.
When are Taxes Due?
Every year, you need to file your tax return to Uncle Sam for the previous year, which is due on the tax day. The tax filing deadline is set for April 15. It will, however, be shifted to the next business day if it falls on a weekend.
What are the methods of filing a tax return?
There are several methods with which you can file your tax return, but as simple as they might seem, it is always a good idea to consult a tax professional such as Don Bell Law.
Mail: this is a factor of the state you live in. here is a list of address by the IRS
DIY: there are free tax preparation software
Tax professional: this is for people with as simple or as complicated as a tax situation can seem
When Should I Expect the refund?
Uncle Sam specified that for taxpayers that e-filed and paid through direct deposits, their refunds will be available within 21 days. People submitting paper returns should expect their returns within six weeks. Also, things that delay refunds are some credits and deductions.
FOR MORE INFORMATION OR TO SEE HOW DON BELL LAW CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.
THANKS FOR VISITING.
Don Bell Law