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Author name: Zak E.

Tax Central

Report ALL Earnings

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As a taxpayer, it’s important to understand the importance of reporting all of your income to the IRS. The IRS requires that all income, regardless of how it was earned, be reported on your tax return. This includes income from wages, salaries, tips, and self-employment, as well as income from investments, rental properties, and even gambling winnings. One of the most common sources of income that people forget to report is money earned from side hustles or gig economy jobs. With the rise of platforms like Uber, Lyft, and Airbnb, more and more people are earning money on the side, and it’s important to remember that this income is still subject to taxes. If you’re an Uber driver, for example, the income you earn from driving people around is considered self-employment income and must be reported on your tax return. Another source of income that is often overlooked is rental income. If you own a rental property, you must report the rent you collect on your tax return. Additionally, any expenses related to the property, such as mortgage interest, property taxes, and repairs, can be deducted as rental expenses. Investment income is also a common source of income that people forget to report. This includes income from stocks, bonds, and mutual funds, as well as income from rental properties. If you have investment income, it’s important to keep accurate records of all your transactions and report them on your tax return. Gambling winnings are also subject to taxes. If you win big at the casino or the racetrack, the IRS wants to know about it. You’ll need to report your winnings on your tax return and pay taxes on them. It’s also important to note that if you receive any type of income that is not typically subject to withholding, such as gambling winnings or rental income, you may need to make estimated tax payments throughout the year. This will help you avoid any penalties or interest charges that may be assessed for underpayment of taxes. In conclusion, reporting all of your income to the IRS is a legal requirement that should not be taken lightly. Failure to report all income can result in penalties, fines and even criminal charges. It’s important to keep accurate records and report all income, no matter how small, on your tax return. With the rise of gig economy jobs and the sharing economy, this is more important than ever before. So make sure you report all your income to the IRS and avoid any problems with the law.

Tax Central

Should You Hire a Tax Professional

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When it comes to filing your taxes, you have a few options: you can do it yourself, use tax software, or hire a tax professional. Each option has its own set of pros and cons, but hiring a tax professional is often considered the best choice for many taxpayers. One of the biggest advantages of hiring a tax professional is the knowledge and expertise they bring to the table. Tax laws and regulations are constantly changing, and a tax professional will be up-to-date on the latest changes and how they apply to your situation. They will also be able to identify deductions and credits that you may not be aware of, which can save you a significant amount of money on your taxes. Another advantage of hiring a tax professional is that they can help you navigate the complex tax forms and paperwork. Tax forms can be confusing and time-consuming, and a tax professional can help you fill them out correctly and ensure that you meet all of the deadlines. They can also help you with tax planning and tax strategy, which can help you save money on your taxes in the long run. Hiring a tax professional can also provide you peace of mind knowing that your taxes are being handled by someone with experience and expertise. Mistakes on your tax return can result in penalties, fines, and even an audit. A tax professional will be able to spot potential errors and help you avoid them. If you are self-employed or own a small business, hiring a tax professional is especially important. Self-employed individuals and small business owners have more complex tax situations, and a tax professional can help you navigate the tax laws and regulations that apply to your business. They can also help you with tax planning and strategy to minimize your tax liability. On the other hand, hiring a tax professional can be costly. It’s important to keep in mind that fees will vary depending on the complexity of your tax situation and the type of service you require. Before hiring a tax professional, it’s a good idea to get an estimate of the cost and compare it to the cost of doing your taxes yourself or using tax software. In conclusion, hiring a tax professional can be a smart choice for many taxpayers. They bring knowledge, expertise and can help you navigate the complex tax laws and regulations. They can also help you identify deductions and credits that you may not be aware of, and help you with tax planning and strategy. However, it’s important to consider the cost of hiring a professional and weigh it against the cost of doing your taxes yourself or using tax software. Ultimately, it’s your decision, but if you have any doubt or a more complex tax situation, it’s always a good idea to consult a professional.

Personal Finance, Tax Central

How long should You keep tax documents?

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When it comes to tax documents, it’s important to know how long you should keep them. The general rule of thumb is to keep records for three years from the date you filed your original return. However, there are some exceptions to this rule that you should be aware of. One of the main reasons why you should keep your tax documents for at least three years is in case the IRS decides to audit you. If the IRS conducts an audit and you can’t produce the necessary documentation, you may be assessed additional taxes, penalties, and interest. Keeping your tax documents for at least three years will ensure that you have everything you need in case of an audit. Another reason why you should keep your tax documents for at least three years is in case you need to file an amended return. If you discover an error on your original return, you have three years from the date you filed your original return to file an amended return and claim a refund. If you don’t have your tax documents, you won’t be able to file an amended return and claim a refund. If you claim certain types of deductions or credits, it’s recommended to keep your tax documents for longer than three years. For example, if you claim the home office deduction, you should keep your tax documents for six years from the date you filed your original return. This is because the IRS has six years to audit you if it suspects that you’ve understated your income by 25% or more. If you own rental property, you should also keep your tax documents for longer than three years. For rental property, you should keep records for at least three years after you’ve sold the property. This is because the IRS has three years to audit you after you’ve sold the property and claimed a loss or depreciation. In addition, if you have any records related to your retirement accounts, such as 401(k) or IRA, you should keep them until the account is closed or until you have reached the age of 70 and a half. In conclusion, the general rule of thumb is to keep records for three years from the date you filed your original return. However, there are some exceptions to this rule that you should be aware of. If you claim certain types of deductions or credits, own rental property or have retirement accounts, it’s recommended to keep your tax documents for longer than three years. The most important thing is to keep accurate records and don’t discard your tax documents until you are sure you don’t need them anymore.

Personal Finance, Tax Central

When can you expect your tax refund?

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One of the most common questions taxpayers have is, “When can I expect my tax refund?” The answer is that it depends on when and how you filed your tax return. The IRS generally issues refunds within 21 days, but there are a few factors that can impact the timing of your refund. The first factor that affects when you can expect your refund is when you file your tax return. If you file your tax return early, you’ll get your refund sooner. The IRS begins accepting tax returns on January 1st and the earlier you file your return, the sooner your refund will be processed. However, if you file your tax return closer to the deadline, your refund will be delayed. The second factor that affects the timing of your refund is how you file your tax return. If you file your tax return electronically, you can expect your refund to be processed within 21 days. Electronic filing is the fastest and most efficient way to file your taxes. On the other hand, if you file a paper tax return, it may take six to eight weeks for your refund to be processed. Another factor that can affect the timing of your refund is if your return contains errors or is incomplete. If the IRS finds errors or missing information on your return, they will send you a letter requesting additional information. This can delay your refund until the issues are resolved. Another important factor to consider is the refund status check. You can check the status of your refund by visiting the IRS website and using the “Where’s My Refund?” tool. This tool will provide you with information on the status of your refund, including the date it was processed, the date it was approved, and the date the refund was sent. The IRS also offers the option to receive your refund in the form of a direct deposit. This option is faster and more secure than receiving a paper check in the mail. Additionally, if you choose to receive your refund via direct deposit, you can check the status of your refund using the “Where’s My Refund” tool. Finally, it’s important to keep in mind that the IRS may hold your refund if you owe taxes or other debts. If this is the case, your refund will be applied to the outstanding debts, and you’ll be notified of the action in a letter from the IRS. In conclusion, when you can expect your tax refund depends on when and how you filed your tax return. The IRS generally issues refunds within 21 days, but there are a few factors that can impact the timing of your refund. To get your refund faster, file your tax return early and electronically. You can also check the status of your refund using the “Where’s My Refund” tool and opt to receive it via direct deposit. Remember that if you owe taxes or other debts, your refund may be held by the IRS.

Personal Finance, Tax Central

Do college students need to file taxes?

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As a college student, you may be wondering if you need to file taxes. The answer is that it depends on your income and filing status. If you’re single and earn over $12,000 in a year, it’s mandatory for you to file a tax return. This income can come from various sources such as wages from a part-time or full-time job, interest income from savings accounts, or even scholarships and grants. If your income is below $12,000, you’re not required to file a tax return, but you may still want to file one if you’re eligible for certain tax credits or deductions. If you’re a dependent of your parents, the rules are a bit different. If your parents claim you as a dependent on their tax return, they will claim your income on their return as well. However, if you’re earning more than $12,000 and are not being claimed as a dependent on your parents’ return, you’ll need to file your own return. Another important thing to consider is whether you have taxes withheld from your paycheck or not. Even if you’re not required to file a tax return, if you had taxes withheld from your paycheck, you may be eligible for a refund. In that case, you’ll need to file a tax return to claim the refund. As a college student, there are certain tax credits that you may be eligible for. The American Opportunity Tax Credit (AOTC) is a tax credit of up to $2,500 that’s available to students who are in the first four years of college. The Lifetime Learning Credit (LLC) is another tax credit of up to $2,000 that’s available to students who are in any year of college, graduate school, or vocational school. Both of these credits can help you reduce your tax liability. In addition, if you’re paying for college expenses such as tuition, fees, books, and supplies, you may be able to claim a tuition and fees deduction. This deduction can reduce your taxable income by up to $4,000. In conclusion, whether or not college students need to file taxes depends on their income and filing status. If you’re single and earn over $12,000 in a year, it’s mandatory for you to file a tax return. As a college student, there are certain tax credits and deductions that you may be eligible for which can help reduce your tax liability. Even if you’re not required to file a tax return, it’s important to check if you have taxes withheld from your paycheck and if you’re eligible for a refund.

For Business, Record Keeping Tips, Tax Central

Do you need to report income from your side hustle?

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With the rise of the gig economy, more and more people are turning to side hustles to supplement their income. Whether it’s driving for Uber, delivering food for DoorDash, or selling items on Etsy, side hustles can provide a significant source of income. However, it’s important to remember that any income earned from a side hustle is subject to taxes and must be reported on your tax return. One of the most common sources of income from side hustles is self-employment income. If you’re earning money from a side hustle, you’re considered self-employed and must report that income on Schedule C of your tax return. On Schedule C, you’ll list your income and expenses related to your side hustle, and any net profit is subject to self-employment taxes. Another common source of income from side hustles is rental income. If you’re renting out a room on Airbnb or renting out your car on Turo, you must report that income on your tax return. Rental income is reported on Schedule E of your tax return, along with any expenses related to the rental property. If you’re earning money from a side hustle that involves selling items, such as on Etsy, you’ll need to report that income on your tax return as well. Sales of goods are reported on Schedule C or Schedule C-EZ and any net profit is subject to self-employment taxes. It’s also important to keep in mind that if you’re earning money from a side hustle, you may be required to make estimated tax payments throughout the year. This is because most side hustles don’t have taxes withheld from the income, so you’ll need to make estimated tax payments to avoid penalties for underpayment of taxes. In conclusion, no matter what your side hustle is, you need to report any income earned from it on your taxes. It’s important to keep accurate records of all your income and expenses related to your side hustle and report them on the appropriate tax forms. Failure to report income from a side hustle can result in penalties and fines, so make sure you’re following the tax laws and regulations. If you’re unsure how to report your side hustle income, it’s always a good idea to consult with a tax professional.

Record Keeping Tips, Tax Central

Top Sources of Nontaxable Income

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Nontaxable income refers to any type of income that is not subject to federal income taxes. This can include a variety of different sources, and it’s important to understand which types of income fall under this category in order to minimize your tax liability. In this blog post, we’ll take a look at some of the most common sources of nontaxable income. Gifts Gifts are a form of nontaxable income, as long as they do not exceed a certain value. According to the IRS, you can receive up to $15,000 in cash or property from a single individual in a given year without it being subject to taxes. If you receive a gift that exceeds this amount, you will need to pay taxes on the excess value. Life Insurance Proceeds Life insurance proceeds are another form of nontaxable income. If you receive a lump sum payment from a life insurance policy, it is typically not subject to taxes. However, if you receive the payment in the form of an annuity, you may be subject to taxes on the interest earned. Disability Income Disability income, whether from a private disability policy or from the government, is generally not subject to taxes. This includes payments from Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). Inheritances An inheritance is another form of nontaxable income, as long as it is not considered to be part of your estate. Once an inheritance becomes part of your estate, it may be subject to estate taxes. Workers Compensation Benefits Workers compensation benefits are also typically not subject to taxes. These benefits are intended to help employees who are unable to work due to a work-related injury or illness. They can include payments for medical expenses, lost wages, and permanent disability. In conclusion, it’s important to understand the different types of nontaxable income and how they’re treated by the IRS. By knowing which types of income are not subject to taxes, you can take steps to minimize your tax liability and keep more money in your pocket. Keep in mind that these are general guidelines and you should always consult a tax professional or the IRS to get a clear understanding of how taxes apply to your specific situation.

Record Keeping Tips, Tax Central

What Is Considered Taxable Income

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Taxable income is a crucial concept to understand when it comes to preparing and filing your taxes. It refers to any type of income that is subject to taxation by federal or state authorities. In this blog post, we’ll take a closer look at what is considered taxable income and the different types of income that fall under this category. Actively-Earned Wages Wages earned from your job, such as your salary or hourly pay, are considered taxable income. This includes any bonuses or commissions you may receive as well. These types of income are typically reported to the IRS on a W-2 form and are subject to both federal and state income taxes. Self-Employment Income If you’re self-employed, your income from your business is considered taxable income. This includes income from freelance work, consulting, or any other type of gig work. Self-employed individuals are responsible for paying self-employment taxes, which include Social Security and Medicare taxes. Investment Income Income earned from investments, such as interest, dividends, and capital gains, is also considered taxable income. Interest income is typically reported on a 1099-INT form, while dividends and capital gains are reported on a 1099-DIV or 1099-B form. Rental Income If you own rental property, the income you earn from renting it out is considered taxable income. This includes any money you receive from tenants, such as rent payments and security deposits. Any expenses related to the rental property, such as property taxes, repairs, and management fees, can be used to offset the income and lower your tax liability. Retirement Income Income from retirement accounts, such as traditional 401(k)s and IRAs, is considered taxable income when you begin taking withdrawals. The same goes for social security benefits if you exceed the limits set by the government. Gambling winnings If you win money from gambling, whether it’s from a casino, lottery, or other source, it is considered taxable income and must be reported on your tax return. It’s important to keep in mind that these are general guidelines and that your specific tax situation may be affected by other factors, such as deductions and credits. Be sure to consult with a tax professional or refer to the IRS website for more information on what is considered taxable income and how it applies to your unique situation. In conclusion, taxable income refers to any type of income that is subject to taxation by federal or state authorities. It includes actively-earned wages, self-employment income, investment income, rental income, retirement income and gambling winnings. It’s crucial to understand what is considered taxable income in order to accurately report your income and minimize your tax liability.

Record Keeping Tips, Tax Central

Types of tax credits

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Tax credits are a valuable tool for reducing your tax liability and keeping more money in your pocket. They are different from deductions, which reduce the amount of income that is subject to taxes, and can have a bigger impact on your tax bill. In this blog post, we’ll take a closer look at the different types of tax credits and how they can benefit you. Nonrefundable Tax Credits A nonrefundable tax credit is a credit that can only be used to offset the amount of taxes you owe. It cannot be used to receive a refund if the credit amount is greater than the taxes you owe. Some examples of nonrefundable tax credits include the Child Tax Credit and the Lifetime Learning Credit. Partially Refundable Tax Credits A partially refundable tax credit is a credit that can be used to offset the amount of taxes you owe, and the remainder can be used to receive a refund if the credit amount is greater than the taxes you owe. Some examples of partially refundable tax credits include the American Opportunity Tax Credit and the Earned Income Tax Credit. Fully Refundable Tax Credits A fully refundable tax credit is a credit that can be used to receive a refund if the credit amount is greater than the taxes you owe. This means that even if you don’t owe any taxes, you can still receive a refund for the full amount of the credit. An example of a fully refundable tax credit is the Additional Child Tax Credit. Tax credits can have a significant impact on your tax bill and can help you save money. It’s important to understand the different types of tax credits that are available and how they can benefit you. Keep in mind that tax laws and regulations are subject to change, so it’s always a good idea to consult with a tax professional or refer to the IRS website for the most up-to-date information. In conclusion, tax credits are a valuable tool for reducing your tax liability. The types of tax credits include nonrefundable, partially refundable and fully refundable. Nonrefundable tax credits can be used to offset taxes you owe, partially refundable tax credits can be used to offset taxes you owe and receive a refund for the remainder and fully refundable tax credits can be used to receive a refund even if you don’t owe any taxes. It’s important to understand the different types of tax credits and how they can benefit you to maximize your savings.

Tax Central, Tax Problems

Types of Nonrefundable Tax Credits

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Nonrefundable tax credits are a valuable tool for reducing your tax liability, but unlike refundable tax credits, these credits can only be used to offset the amount of taxes you owe. They cannot be used to receive a refund if the credit amount is greater than the taxes you owe. In this blog post, we will take a closer look at some of the most common types of nonrefundable tax credits and how they can benefit you. Adoption Tax Credit The Adoption Tax Credit is a nonrefundable tax credit that can help offset the costs of adopting a child. This credit can be used to cover expenses such as adoption fees, court costs, attorney fees, and travel expenses. The credit amount is based on the expenses incurred and the income of the taxpayer. Foreign Tax Credit The Foreign Tax Credit is a nonrefundable tax credit that can be used to offset taxes paid to a foreign country. This credit is intended to prevent double taxation of the same income. Eligible taxpayers can claim the credit on their US tax return for foreign taxes paid on foreign-source income, such as interest, dividends, and capital gains. Saver’s Credit The Saver’s Credit is a nonrefundable tax credit that is intended to encourage low- and moderate-income individuals to save for retirement. The credit is based on the amount of money you contribute to a qualified retirement plan such as a 401(k) or IRA and the income of the taxpayer. Residential Energy Efficient Property Credit The Residential Energy Efficient Property Credit is a nonrefundable tax credit that is intended to encourage individuals to make energy-efficient improvements to their homes. The credit can be claimed for the installation of certain energy-efficient products such as solar water heaters, solar panels, and wind turbines. Credit for the Elderly or the Disabled The Credit for the Elderly or the Disabled is a nonrefundable tax credit that is intended to provide tax relief for taxpayers who are age 65 or older, or who are retired on permanent and total disability. The credit is based on the taxpayer’s income and filing status. Child Tax Credit The Child Tax Credit is a nonrefundable tax credit that can be claimed for each qualifying child under the age of 17. The credit can be worth up to $2,000 per child for tax year 2021. It’s important to note that the tax laws and regulations are subject to change, so it’s always a good idea to consult with a tax professional or refer to the IRS website for the most up-to-date information on the different types of nonrefundable tax credits. In conclusion, nonrefundable tax credits are a valuable tool for reducing your tax liability, but unlike refundable tax credits, these credits can only be used to offset the amount of taxes you owe. Some examples of nonrefundable tax credits include Adoption Tax Credit, Foreign Tax Credit, Saver’s credit, Residential energy efficient property credit, Credit for the Elderly or the Disabled, and Child Tax Credit. It’s important to understand the different types of nonrefundable tax credits and how they can benefit you and consult with a tax professional for more information.