Taxes Archives - Merrimack Tax Associates

Payment Options If You Owe Back Taxes to the IRS

Written by Paul Belfiore on October 11, 2024. Posted in Blog, Taxes.

Milford, NH Resident Looks for Help

When you owe back taxes to the IRS, it is important to have an open line of communication with the agency. In most cases, they are willing to work with you to set up a payment plan or negotiate the balance owed. If you neglect to pay or communicate with the IRS regarding your outstanding tax bill, you may face liens on your home and other property, wage garnishment, and even restrictions placed on your passport. If you owe less than $50,000, you may be able to repay this money through the streamlined installation agreement. This allows you up to 72 months to repay the money. You can ask the IRS for an extension to pay, giving you an additional 180 days to gather the funds before paying the bill.

What Happens to Tax Debt Posthumously?

Written by Paul Belfiore on September 27, 2024. Posted in Blog, Taxes.

Amherst, NH Family Seeks Answers After Losing Their Loved One

In the event of a death with taxes owed to the IRS, the executors and administrators of the estate are responsible for this debt. In general the IRS can only claim outstanding tax debts that can be taken out of the estate. This means that the executor is not liable personally for any outstanding tax debt. This includes any past outstanding taxes, as well as past and future taxes. Future tax bills may be incurred if the estate includes investments that are earning dividends or a rental property generating income.

What are the Tax Penalties for Early Withdrawal on Retirement Accounts?

Written by Paul Belfiore on September 13, 2024. Posted in Blog, Taxes.

Litchfield, NH Resident Weight the Pros and Cons

Retirement accounts, from 401(k)s to traditional and Roth IRAs, offer lots of opportunities to grow your money with a tax advantage to boot. Participants in traditional 401(k)s, traditional IRAs, and Roth IRAs are not allowed to withdraw funds before age 59 ½ without penalty. If a hardship or life event makes this early withdrawal necessary, the typical penalty is 10% and the money withdrawn is taxed as income at the time it is received.

What are Some Factors that Can Affect How Much You Pay in Taxes?

Written by Paul Belfiore on August 30, 2024. Posted in Blog, Taxes.

Amherst, NH Taxpayer Looks for Advice

The biggest factor that determines how much you will pay in taxes is your taxable income. The federal tax system is progressive, meaning you will pay a higher tax rate as you earn more money. However, not all of the money is taxed at the higher rate, as determined by your tax brackets. Your filing status, whether filing your taxes as single, jointly as a married couple, or as head of household will also affect your tax rate. Adjustments and exemptions can help to lower your taxable income, reducing your tax bill. Tax deductions and tax credits can also lower the amount of taxes that you will have to pay for a calendar year.

How is My Tax Money Used?

Written by Leif Masella on August 16, 2024. Posted in Blog, Taxes.

Goffstown, NH Resident Has Questions About Where Her Money is Going

The money withheld for federal taxes goes to support a variety of expenses and programs. There are three biggest expenditures for the federal government that are funded by our tax dollars. These include health programs such as Medicare and Medicaid, social security, and defense. The largest portion of this tax money is used for healthcare and social security, with more than half of tax money being used to support these programs. Another percentage is dedicated to pay interest on the national debt. The remaining federal tax dollars are used to fund government programs including energy, education, and agriculture.

Why Would You Incur an IRS Penalty

Written by Paul Belfiore on July 26, 2024. Posted in Blog, Taxes.

Bedford, NH Resident Looks to Understand Potential IRS Penalties

One of the most common IRS penalties is failure to file. If you do not file your taxes by the April 15th date, though this may vary if it falls on a weekend, or October 15th if you filed for an extension, the IRS could charge you a failure to file penalty. If you file your taxes but do not pay the balance owed to the IRS by the April deadline, you may incur a failure to pay penalty. Self-employed individuals, including freelancers and business owners, are required to pay estimated taxes. If you conclude the year owing more than $1,000 to the IRS, you can be hit with the failure to pay proper estimated taxes penalty. If the check that you send in to cover your outstanding taxes does not clear the bank, the IRS can charge you a dishonored check penalty.

Is it Better to Over or Underpay Your Estimated Quarterly Taxes?

Written by Paul Belfiore on July 12, 2024. Posted in Blog, Taxes.

Self-Employed Resident in Brookline NH Looks for Advice

Ideally your estimated tax payments will be as close to the amount of taxes owed as possible, leaving you breaking even at the end of the year. If you wind up owing more than $1,000 to the IRS when it comes time to file your taxes, you can face a penalty for underpayment. Pay too much in estimated taxes and the government is left earning interest, money that could have been in your pocket throughout the year. With a business that has fluctuating sales and income, you will likely need to adjust your quarterly payments based on income and expenses.

Which Tax Records Do You Need to Keep?

Written by Paul Belfiore on June 28, 2024. Posted in Blog, Taxes.

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.

How Student Loans Can Affect Your Taxes

Written by Paul Belfiore on June 14, 2024. Posted in Blog, 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.

Do College Students Need to File Their Own Tax Return?

Written by Paul Belfiore on May 31, 2024. Posted in Blog, Taxes.

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.