Tag: taxes

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.

What to Do If There Is a Calculation Error on Your Taxes After Filing

Written by Paul Belfiore on May 17, 2024. Posted in Blog, Taxes.

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.

What are Some Factors that Will Affect the Size of Your Tax Refund?

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

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.

What Happens If You Don’t File Your Taxes on Time?

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

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.