Posts Tagged ‘tax returns’

What happens if you don’t pay your taxes?

Monday, December 21st, 2009

Every taxpaying American citizen is required by law to file a tax return by April 15th of every year. Failing to submit your tax forms on time, or submitting them with incorrect information, is a crime that can earn you jail time if the IRS finds out, but you might wonder just how that happens. What is the process through which the IRS catches you and decides whether or not to press charges?

Businesses have to file tax returns for all their employees, so as long as you aren’t self-employed, tax infractions are relatively easy to spot. Even if you don’t work for anyone else, the IRS tends to audit the very wealthy more often, and since your tax records from years past are kept on file, the IRS can spot the discrepancy if you just stop paying taxes all of a sudden. The IRS also performs some random audits every year for statistical purposes, and every tax return that goes through gets a DIF score – basically, a measure of how suspicious it looks. If your DIF score is high enough, the computer program that evaluated your tax return will audit you automatically.

The good news is that the IRS generally won’t press charges even if they do bust you – they’ll probably just file a tax return on your behalf and then charge you for it. But anyone who files an incorrect tax return – or doesn’t file at all – is potentially at risk for jail time, so it’s worth it to keep careful records.

How do you know if you have to file an income tax return?

Monday, December 21st, 2009

Income tax filing requirements are easy to describe but difficult to state specifically. Basically, you have to file a tax return if your income for the fiscal year is above a certain level. What is that level? That’s the tricky part. The numbers can vary from year to year, so if you’re not sure whether you qualify, you can check the IRS website to find out. But here are some general rules of thumb that determine the relative level you have to reach:

Here are the minimum income requirements for several filing statuses for 2008:

  • Single and under 65: $8,950 (though if someone else can claim you as a dependent on their tax return, this number will be slightly lower)
  • Single and over 65: $10,300
  • Head of household and under 65: $11,500
  • Qualifying widow(er) with dependent child and under 65: $14,400

Hungry for more filing facts? We’re here for you:

  • If you are over 65, your income has to be greater than a younger person’s to qualify for taxation.
  • If your filing status is head of household or qualifying widow(er) with dependent child, your income has to be greater to qualify than if you file as single.
  • If your filing status is married filing separately, you must file a tax return.
  • If someone has claimed you as a dependent on his or her tax return but you still received income for that year, you have to file a tax return if your income is above a certain level (usually relatively lower than for non-dependents).
  • You may also have to file a one-time-only tax return if you don’t normally make these levels but you come into a sudden sum of money (say you’re unemployed and win the lottery, for example).

So while the numbers may change, the basic principles behind them are that the IRS cuts you more of a break if you’re over 65, the head of a household, or widowed with a dependent child.

A Tax Refund is…

Wednesday, August 5th, 2009

A tax refund is money you get back from the government if you’ve paid more in taxes than you actually owed.

Filing Status is…

Wednesday, August 5th, 2009

Filing status is the category you fill out on your income tax return that determines the rate of your income tax (for example, a filing status of “single” will result in your paying more taxes than someone who has approximately the same income but files as “head of household”). There are five filing statuses: single, married filing separately, married filing jointly, head of household, and qualifying widow(er) with dependent child.

Form 1099 is…

Monday, August 3rd, 2009

Form 1099 is an information return form, a document used to report income that doesn’t come from wages, salaries, or tips to the IRS. There are many different versions of the form, depending on what specific type of income you have to report, for example, to report income from unemployment benefits, you use a form 1099-G.

Two for the price of one?

Monday, August 3rd, 2009

Once you’re married, you and your spouse probably live under the same roof and share most of the expenses, so it makes sense that you should be able to share taxes, too, right? The government does allow married couples this option: you and your spouse can choose to file joint or separate tax returns. If you file a joint tax return, the government basically taxes the two of you as one person, lumping your incomes and tax deductions together; if you file separately, you’re taxed in much the same way you both were when you were single.

Why does the government give you the option to file separately? Although filing a joint tax return usually means you and your spouse pay less in taxes, this isn’t always the case. The problem is tax deductions due to theft, casualty losses, or medical expenses: in order to earn a tax break for these and similar catastrophes, you usually have to have lost or been charged for a certain percent of your income (usually 10% for casualty losses and around 7.5% for medical expenses). If you file jointly, your income is higher, so it’s harder to reach the benchmark that would let you qualify for those deductions. It’s a matter of considering both options and figuring out which one saves you more money.

Form 1040 is…

Friday, July 24th, 2009

Form 1040 is an individual income tax return form every qualifying taxpayer has to fill out annually and submit to the IRS. You only have to file form 1040 if you make more than a certain amount of money in a year.

What kind of taxpayer are you?

Friday, July 24th, 2009

You have a different filing status (taxpayer type) depending on your living situation. Your filing status helps determine your eligibility for certain credits and deductions and how much those deductions are worth, how you should submit tax information to the government, and how much you need to pay in income taxes. There are five main filing statuses, each generally designating a different level of financial dependence or independence.

“Single” is basically the square one of filing statuses: it means you’re only responsible for yourself.

If you’re married, you and your spouse can choose either the “married filing jointly” or “married filing separately” statuses. If you file separately, you’re basically treated as two “single” individuals, while joint tax returns make the two of you more like one entity.

If you file as “head of household,” it means that you have at least one dependent. A dependent is someone who has someone else (you, in this case) provide at least half of his or her income. Children and elderly or retired parents are the most common dependents, but you can claim anyone who fits this description as your dependent. When you file as head of household, you’re saying that you’re responsible for supporting at least one other person, so in return you have to pay less in taxes yourself. Lastly, you can file as qualifying widow/widower with dependent child; this status also decreases your taxes because you have a dependent to support and you’ve lost a source of income with the death of your spouse.