Understanding taxes isn’t the easiest thing, especially in the United States. The complexity and complications that taxes bring to the table are all due to numerous laws and institutions that regulate the taxes. You will have to file many different kinds of taxes, all of which can be confusing by themselves.
If you don’t file your taxes correctly, the side effects could be criminal. Aside from the personal income taxes, you need to know about investment taxes, write-offs, and similar things.
Getting all of your taxes in order is very important. The tax day deadline usually falls on the 15th of April, unless it’s a holiday such as Patriots day. In the case of 2021, the tax day is on Thursday, the 15th of April.
Taxes, Tax Day, and Tax Brackets
Taxes are incredibly complex, and filing them might not be the easiest thing around. In this section, we’re going to brief you on taxes, tax filing, and tax brackets. If you have no idea about taxes, you’re going to find all the answers in this section.
The only two things that are entirely certain are death and taxes, and the latter requires some prior knowledge to do it properly. If you don’t pay your taxes correctly, you can rest assured that penalties, fines, or jail time are coming your way. So, doing your taxes is an essential step that every American has to learn about.
Paying taxes is a necessary thing, and paying them on time is essential. If you prepare for tax day in advance, you can rest assured that the process is going to go smoothly.
If you pay your taxes late, you will be presented with a couple of fines. You’re going to have to pay a failure to file penalty – and a couple of others, depending on how late you are. Add 5% on the amount that you owe and, every month, add 5% up to a whopping 25%.
If you’re two months late on your taxes, you’re going to get two different options. You’re either going to have to pay all of the taxes that you owe – or a fixed amount of $135.
Filing your taxes isn’t the only necessity that you have to oblige to. If you fail to pay the filed taxes, you’re going to have to pay a failure-to-pay penalty, which is 0.5% for every month that you didn’t pay. It can go up to 25% again, which is a slower and smaller process than the previous fee, but still a considerable amount.
If you don’t pay taxes on time, you’re going to have to pay interest as well. That is why you should do your best to prepare for tax day in advance.
Tax day is far from a national holiday. Tax day is on the 15th of April and is the day when a large proportion of US residents have to file their taxes and inform the IRS of the income they have received in the previous fiscal year.
Now, this might come as a shocker, but not all residents of the USA have to file and inform the IRS about their finances. Veterans, pensioners, and low-income households don’t have to do this, unless they want to qualify for certain types of income subsidiaries, such as food stamps.
In recent years, you can file your taxes electronically. If you’re looking to file a tax return through the internet, it’s the favored method for the IRS. This methodology of tax filing significantly cuts down on possible errors and lets the IRS store your documents with more efficiency.
E-Filing is the best way to go around things. It’s important to remember that the late payment fee is significantly higher than the late filing fee, so you’re advised to file your taxes on time.
When you’re filing your taxes, you will need to know the tax bracket you fall into. The IRS released the 2020 tax brackets back in November 2019, with minor changes. The standard deductions have been raised to $12.400 for single filers and separately filing married couples. Married couples that are filing together can deduct $24.800, and head of households can deduct up to $18.650
A Deeper Look Into Tax Brackets & Tax Filing
In this section, we’re briefly going to go over all there is to know about filing your taxes. That includes all the different forms and how to fill them – alongside all the documents and details that you will need to prepare for this.
The Documents, Details, and Information Needed For Tax Filing
There are two ways to go about tax filing. You can file your taxes yourself – or you can hire a professional tax filing agency. We’re going to get into this a little bit later. Whichever option you pick, you will have to collect a couple of pieces of personal information.
The information that you will need to provide when you’re filing your taxes is:
- Social Security Number
- Tax ID Number
- A W-2 form
- 1099 Forms
- Property Tax Reports
- Mortgage interest Reports
- All income records
- Bank Statements
- Retirement Account Contributions
- Education and Classroom expenses
- Already paid tax statements
- Donation to Charity reports
Form 1040 is perhaps the most important form that you will need to fill out when you’re doing your taxes. It’s the most important form of all and works to report all of your income to the IRS.
It also allows you to collect your deductions and credits, which are later used to calculate your tax bill and make you eligible for a tax refund.
In this form, you will need to provide all of your personal information and state your tax filing status (Married Couple, Widow, Single Filer, Veteran).
After collecting all this information, it’s time to calculate your taxable income and subtract any taxes that you owe. If you’ve paid more than you’re owed, you can get a tax refund.
Form 1040 consists of schedules. These schedules dictate any additional credits and deductions that you would like to claim. To make the whole thing far less confusing, we’ve split them up and explained each one below.
Schedule one entails any additional income or income adjustments that you need to make. The income adjustments and additions that fall within this category are:
- Alimony Checks
- Farm incomes
- Rental Incomes
- Student Loan Interest
- Prizes and Gambling incomes
- Business income
Schedule 2 is reserved for any owed alternative minimum tax or excess advance premium tax credit repayment. If you have any of these, file them within section two.
Schedule 3 stands for nonrefundable credits, such as:
A foreign tax credit
- Dependent care expenses
- General business credit
- Education credit
Schedule four is reserved for medicare, net investment, and self-employment taxes.
If you’re looking for a tax extension or claiming a refundable credit that’s not connected to income, children, or American Opportunity Tax, you will have to file it under schedule five.
Schedule six is reserved for people who have addresses outside of the USA. Alternatively, section six is used by anyone who has the power to discuss your tax return with the IRS.
Should I Do My Taxes Myself Or Hire Professional?
Filing your taxes is no easy task, and even the most minor of issues can cause a couple of different problems. These issues can be some fees and, in more severe cases, some jail time. In this section of the article, we’re going to give you a brief overview of whether you should DIY your taxes or hire a professional tax preparation agency. We’re also going to go over two of the most popular tax agencies, and how they match up one against the other.
Should You Do Your Own Taxes?
It’s challenging to fully understand what taxes are and how to file them properly. Since there are considerable risks of failing to pay or file your taxes correctly, some people opt to hire professional services.
When the question is, should you do your taxes yourself, there are a couple of things that you need to consider. Of course, doing your taxes yourself is going to be far cheaper compared to hiring a professional agency to do it, but if you mess something up, the results can be nightmarish.
In short, if you think you are capable of doing your taxes by yourself, by all means, you should. If you are capable of gathering all of the paperwork needed and sectioning it properly, you should consider doing your own taxes.
If you’re a little tight on money, doing your taxes yourself is a must. This is not a significant amount of money, but that’s a subjective thing. If you want to save as much as possible, doing your taxes yourself is a great way to save money.
If you’re looking to do your taxes yourself but are still looking to save money, perhaps you can consider investing in a tax calculation software. The tax software is far cheaper than utilizing the services of professional tax prep companies. This software will help you cut down on time spent on calculations significantly.
The most popular tax software readily available is TurboTax. It can make your personal filing that much more comfortable and that much quicker. It’s an excellent option for people who are looking for a reliable way to file their taxes themselves and is much cheaper than professional tax services.
Professional Tax Preparation and Tax Services
Professional tax services do exist, and they can solve all of your tax issues. If you’re looking to answer all of your taxation civil duties, these companies can help you achieve it. Doing your own taxes isn’t only time-consuming; it’s very confusing.
Some people opt not to have their time wasted by learning all there is to know about taxes and instead choose to hire these services. While they can resolve everything from simple personal taxes, they can tackle the most complicated of taxes as well.
These services cost a preset amount of money, but if you have a need for them, they’re well worth it. They can save you from any fines or jail time you potentially could face were you to file or pay your taxes wrongly.
H&R Block is by far the most popular tax preparation company and is bound to make all of your tax needs easy. They will tackle all of your problems themselves, leaving you with precious time to do other things. They do cost a considerable fee, but if you have a complicated tax situation, you will find that hiring their services is a real lifesaver.
DIY vs. H&R Block vs. TurboTax
The question of whether software could perform entirely as well as a dedicated company is obsolete. But when you take all of the factors into consideration, utilizing software like HR Block might be the better option.
Doing your taxes by yourself might be the cheapest method of them all, but it’s by far the most dangerous. If you make any single error, you’re going to be in a world of financial penalties, possible jail time, and other troubles.
If you are utilizing the services of software such as TurboTax is going to give your tax filing and payment that much more reliability. TurboTax is bound to make the whole process much simpler by streamlining what you need to do. When you’re using TurboTax, all you need to do is provide all of your information, which will be precisely and asked of you.
While utilizing the services of software like this might increase the reliability and speed of your tax filing and payment, it still comes at a price. The price isn’t as considerable as that of hiring the services of a Tax Company like H&R block, but it also doesn’t come with nearly as many benefits.
Utilizing the services of a company like H&R Block is going to give you everything you need about taxes. It’s going to file, pay, and make sure that everything is done correctly. This is by far the most expensive option on the list, but it is well worth it if you’re in a complicated taxation situation.
Ultimately the decision rests in your hands, and whichever option you should pick requires some proper preparation.
The Final Word
Taxes are significant, but they’re best handled when left in the hands of professionals. We hope that we’ve provided sufficient information that will help you on tax day. Remember to make hasty preparations for tax day, which is on the 15th of April.