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Which Tax Records Do You Need to Keep?

Nashua, NH Resident Has Questions About Proper Tax Documentation

It is important to keep a copy of the tax return itself for at least three years and seven years if you are claiming for a loss. There are also supporting documents that you will want to hold onto for several years. These include W2s, 1099s, and bank statements. Keep copies of the invoices, receipts, or canceled checks for those expenses that you have deducted on your tax return. If you own your own home, closing statements, tax assessments, and home improvement receipts if used as a deduction should be kept. Documentation from investment and retirement accounts, including brokerage statements and 1099s, should also be filed away for safekeeping.

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How Student Loans Can Affect Your Taxes

Family in Litchfield, NH Has New College Student and Questions

The interest paid on student loans can be taken as a tax reduction, reducing the taxable income. Using Form 1098-E, which is sent by the lending institution at the end of the year, you can deduct up to $2,500 in annual interest on these loans. This tax deduction applies to all loans used to pay for higher education, not just federal loans. This tax break is an above the line deduction that can wind up saving you a few hundred dollars. However, to qualify for this deduction you must have paid the interest. Those who have their payment paused on an interest waiver are not eligible.

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Family in Hollis, NH Has Questions About Their Future College Student

If a single college student made more than $13,850 throughout the year or had an employer withhold taxes from their paycheck, they should file their own tax return. If their unearned income, including interest, dividends, unemployment compensation, and income as a beneficiary of a retirement plan, exceeds $1,250 for the year a tax return must be filed. If the college student is self-employed with an annual income of $400 or more, a tax return would also need to be submitted at the end of the year reporting this income.

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Hudson, NH Resident Discovers His Mistake

If you discover a mistake in the calculations on your tax return after filing, the IRS will often catch this mistake and make the necessary adjustments to the calculations. There is no need to file an amendment for mathematical errors in your tax return. You will want to make the changes on your end to determine how this will affect your final tax numbers. This can mean that your refund will be larger than expected, smaller, or it could mean that you will end up owing the IRS money. If there is a significant change, particularly in what you owe on your taxes, you will receive a notice in the mail from the IRS indicating the difference.

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Brookline, NH Resident Looks for Answers to This Question

There are many factors that can affect the size of your tax refund from year to year. These include life events, such as your marital status, the number of children you have, and significant life changes that may qualify you for tax credits. Your filing status, whether filing jointly, single, or as head of household can also impact the size of your tax return. Whether you take the standard deduction or itemized deductions can also impact the amount of money you receive back from the IRS. Of course, your income and the amount of taxes that you have paid throughout the year will be a big factor.

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Milford, NH Resident Starts to Panic

If you miss the tax deadline and owe money on your taxes, you will likely incur a penalty up to 5% of the amount of taxes you owe for each month that it is late. This penalty will accrue on top of the tax payment that you already owe the IRS. If this extends beyond sixty days, the minimum penalty is $100 or 100% of the tax due, whichever is less. If you file for an extension this must be done prior to the tax deadline. The extension will give you until October 15, 2024 to file your 2023 taxes. Filing the tax extension in time and subsequently filing your taxes before the October deadline will wipe out the incurred penalties.

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How to Track Your Tax Refund

Nashua Resident Anxiously Waits

The IRS now has a refund tracking tool that allows you to check the status of your tax refund online. To check this, you will need your social security number, filing status, and the exact amount of the refund as outlined on your tax return. You can then check your status at the IRS’ website IRS Where’s My Refund. There are three options that will appear when searching for your refund; return received, refund approved, and refund sent. The first indicates that your tax return is still being processed. If the status is refund approved, this will show a date that the refund will be issued by. Refund sent indicates that the money is on its way. Direct deposit can take as many as five days to appear in your account, while a check mailed may take several weeks.

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Litchfield, NH Resident Looks to Delay the Inevitable

There are plenty of reasons to file your taxes early, not the least of which are to get this done and off your to-do list. If you are expecting a tax refund, the sooner that you file your return the sooner the IRS can begin processing it and get your refund sent out. Filing your tax return early can also protect you from scammers and identity theft. If someone files a fraudulent tax return under your identity and you have already filed, the fraudulent one will be rejected.

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Business Owner in Litchfield, NH Strategizes to Maximize Her Tax Deductions

There are some tax advantages to hiring your spouse to do work for your family business. You will not have to pay FUTA (Federal Unemployment Tax), which is set at 6.0%. Family based businesses are also exempt from withholding FICA (Federal Insurance Contributions Act). In order to take advantage of this tax savings, your spouse needs to contribute to the business for a compensation, making them a legitimate employee. This allows you to convert higher-taxed income from your business profit into lower-taxed income, creating significant savings.

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Amherst, NH Resident Has Questions

The standard deduction for 2023 is $13,850 for single filers and $27,700 for married couples filing jointly. If other eligible deductions exceed this amount, then you will want to itemize your deductions instead. These include mortgage interest, unreimbursed medical expenses exceeding 7.5% of your income, charitable contributions, property taxes, and state or local income tax. To determine whether you should use the standard or itemized deductions, you will first need to have an idea of how many deductions you will have and which offers the greatest amount of savings.

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