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Frequently asked questions
- How do I file my taxes ?
You can either do this electronically or pick up the necessary forms at the IRS physical location to fill. You can file electronically and for free if you make less than $64,000.
- What will happen if I file my tax late?
According to IRS, there is no penalty for filing a late return after the tax deadline if a refund is due. However, failure to file will attract a penalty of is 5% of the unpaid taxes for each month or part of a month that a tax return is late.
- How do I file for an extension?
To get an extension, visit this page. With this free service provided by the IRS, you can get an automatic six months filing extension on Form 4868. You must pay your outstanding debt and estimate your tax liability on this form. If you follow all the steps required and filled the form appropriately, you won’t be subject to the late filing penalties. You can decide to file for an extension manually by filling Form 4868 on paper or consulting a tax preparer. Any method you feel comfortable with is acceptable as long as there are no mistakes.
- What is taxable income, and what are examples?
Taxable income is the portion of income used to calculate your tax burden for a year. There are two types of taxable income: Earned and Unearned taxable income. Earned taxable income is money received from an employer in exchange for work done or money made from self-employment. Examples include wages, salaries, tips, and self-employment income. Unearned income includes money not gotten from work or business. Sources of unearned income include interest and dividends, Social Security payments, alimony, jury duty fees, severance pay from preceding job, royalties and license, union strike benefits, long term disability benefits, freelance employment, long term disability benefits received before minimum retirement, security deposit, and rental income, and canceled debts (persons declaring bankruptcy are exempted), etc.
- Do I need to file an income tax return even if my taxable income is below the threshold limit?
The age and filing status of a taxpayer determines the threshold income for filing a tax return. For single persons under 65 years of age, the threshold income is $12,550. For a single person who is above 65 years, the threshold income is $14,250 For the married filing jointly and are under the age of 65, the threshold income is $25,100 For the married filing jointly and a partner is 65 years or older, the threshold income is $26,450 For married couples who are 65 years and above filing jointly, the threshold income is $27,800 For married filing separately, any age, the threshold income is $5 Qualifying widow(er) under age 65, $25,100 while 65 years or older, the threshold is $26,450. Using the above guide, if your threshold income is below what is recommended for your age and appropriate filing status, you should not file a tax return.
- What states in the United States do not pay personal income taxes, and how do they generate revenue?
Texas, Washington, Alaska, South Dakota, Florida, Nevada, New Hampshire, Tennessee, and Wyoming do not pay income taxes. These states rely on other means of generating income such as sales, property, intangible, excise taxes, etc.
- How long does it take to get a refund?
The IRS deals with refund cases in less than 21 days. However, this might take a little longer in some cases. For instance, if the IRS system detects a possible error or some missing information or suspected identity theft, it might take a longer time to sort such cases.
- What’s the difference between form 1099-k and form 1099-int form?
Form 1099-k records transactions from third-party networks such as PayPal or Venom. You would require this form if you received at least $600. On the other hand, form 1099-int form is issued by interest-paying bodies such as banks, investment firms, and other financial institutions.