New to taxes or need some help? You’re in the right place!
Unless you’ve just received a crisp check from the IRS with your federal tax return, then we’re assuming that the word “tax” can make you shudder at the mention. Paying taxes is something that U.S. citizens are required to do and, whether you believe it or not, taxes go towards benefiting the community, including yourself! Depending on your age, work status, income, and state, the amount of taxes, as well as how you pay your taxes, can differ quite greatly. Understanding taxes and how the IRS works isn’t a fun task and, unfortunately, can get you in some trouble if you don’t go about it correctly.=
Today, we’re going to chat about some of the ins and outs of taxes. If you’re new to paying taxes or just want to learn more about the process, we hope our small debriefing is helpful.
How are Taxes Paid?
If you’re on an employer’s payroll, then, most likely, your taxes are being withheld through them. Employers are required to withhold a certain percentage from taxes including Social Security Tax and Medicare Tax, which are fixed, and Federal Income Tax, which is dependent on what you fill out in your W-4 form. Your W-4 form is available through the IRS and helps determine how much Federal Income Tax an employee is required to pay. Additionally, each state has their own State Income Tax percentage that is also taken out of your paycheck.
What if I’m Self-Employed or Contracting?
If you’re not on an employer’s payroll and you’re making over a specific amount of money, if your tax liability is over $1,000 for the year, then the IRS still requires you to pay taxes, but through a different process. If you’re not traditionally employed, then you’ll need to make quarterly “estimated” tax payments throughout the year. Those required to make estimated taxes will use the IRS Form 1040-ES, which is a resource to help determine how much you need to pay.
Additionally, there are four payment periods and deadlines spaced throughout the year. If you pay too much in estimated taxes, then you’ll likely get that money back on your yearly tax return. Conversely, if you don’t pay enough, then you’ll have to make a larger payment on your end of the year federal tax return. If your tax payments aren’t correct or you miss payments, then you’ll need to solve that with the IRS to prevent penalties.
Because of all of the complications that can arise from estimated tax payments, we recommend contacting a tax accountant to ensure that you’re withholding the correct amount of money and paying installments in due time.
How Much Will I Get Back on My Tax Return?
Your federal tax return is a sum of money that the IRS refunds to people and is dependent on income as well as other factors. Your tax return form, Form 1040, varies on how many people are financially dependent on you and how much taxable interest that you’re currently paying. If you’re married, then you’ll likely file jointly compared to if you’re single which can have different financial implications. Additionally, military personnel in active duty will also file their federal tax return differently! If you’re a college graduate who is paying of federal student loans, then you might be eligible for a higher deduction dependent on how much interest is on the loans.
Tax return forms are required to be correctly filled out and sent to the IRS before the due date, which is usually in the early months of the following year. For example, your 2017 federal tax return form will be due in early 2018. If you’re new to filing taxes, are newly dependent, recently had children, or just feel uneasy about doing your own taxes, it’s very important to contact a tax accountant who is trained in helping clients file taxes correctly and ensuring that they receive the correct amount on their federal tax return!
What If I Make a Mistake?
Nobody is perfect and people make mistakes. In most instances, if you make a mistake, you can request an amended tax return from the IRS. However, the IRS will likely contact you via writing if they find a mistake. Please note that the IRS will never contact you via email or telephone. If you’re contacted by the IRS in these ways, do NOT provide them with any personal information and notify the IRS about this, as it’s likely a scam!
Thank you for reading today’s blog and we sure do hope that we answered your burning questions about taxes. The tax accountants at Royal Oak Financial Group can help you with any of your tax needs and questions. Give us a call today and we’ll get you started on the right path! Thank you!