Tag: Taxes

 

Where Do Our Taxes Go? A Breakdown With the Help of Cardi B

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As the saying goes, nothing in life is certain except for death and taxes. And every year when you file your tax returns, you may be scratching your head, thinking “Where the heck does the money go?”

Cardi B wants to know, too. Last year the superstar rapper, on an Instagram video that went viral, asked, “So you know the government is taking 40% of my taxes. And Uncle Sam, I want to know what you’re doing with my… tax money.”

This is a great question, and the answer: It’s complicated. To keep things simple, here are some figures from an article at The Hill: The federal government spent $33,054 per household and collected $26,198 in taxes. What’s the budget deficit? We’re talking $6,856 per household.

Based on this $33,054 household amount, here’s where the money went:

Social Security/Medicare: $12,401. This comes out of your paycheck, and the 15.3 percent for Social Security and Medicare is divided evenly between you and your employer. Note: If you’re self-employed, you’re responsible for the entire 15.3 percent.

Anti-Poverty Programs: $6,112. This comprises assistance programs to help the less fortunate, like aid for low-income families. Some of these programs include Medicaid, Temporary Assistance for Needy Families (TANF), food stamps, housing subsidies, child care subsidies, Supplemental Security Income (SSI) and low-income tax credits.

Defense: $5,046. This is everything from military paychecks, operations in the Middle East, and the R&D and acquisition of new technologies and equipment.

Interest on the National Debt: $2,434. Just like how you pay interest fees on credit cards, mortgages and car loans, our government pays interest on the national deficit.

Veteran’s Benefits: $1,390. This includes income and health benefits provided to our veterans. 

Federal Employee Retirement Benefits: $1,098. This goes toward retirement benefits for federal employees.

Justice Administration: $546.  This is earmarked toward law-enforcement grant programs, and paying for federal attorneys and prisons.

Education: $536. While the majority of education spending comes from a city and state level, nine percent of K-12 education spending comes from the federal government. Where does the money go exactly? The lion’s share goes to low-income school districts, college student financial aid, and special education.

Health Research and Regulation: $533. This goes toward dozens of grant programs for health providers, as well as the National Institute of Health (NIH), Centers for Disease Control (CDC), and the Food and Drug Administration (FDA).

Highways and Mass Transit: $487. This is funded primarily by the 18.4 cent per gallon tax you pay on gas.

International Affairs: $371. This includes contributions to the UN, operation of American embassies abroad, and economic and military assistance to other countries.

Disaster Relief: $338. This amount provided assistance and relief to hurricanes and natural disasters.

Miscellaneous: $1,761. If you’ve been crunching the numbers, you might have noticed that there’s $1,761 still left to be spent. This remainder is distributed to federal programs that aren’t listed, such as unemployment benefits, social services, natural resources, farm subsidies, and space exploration.

Tax Filing Tips

Now that you have a basic idea of where the money paid from your federal taxes goes, how can you best prepare to file your tax return in 2019? Take a look at some of these tips:

Get Started Early. With all the changes from the Tax Cuts and Jobs Act and this historic, epic government shutdown, filing a return for the 2019 tax year might be a tad more complicated than in previous years. So, it’s important to get a jump on tax prepping as soon as you can.

If you’re going the DIY route, and using software to file on your own, gather all the required documents to file your taxes – starting with your wage and income statements (i.e. W-2s and 1099s). Have your receipts or credit card statements handy in case you need to include deductions. You can even try tracking some of your spending using a money management app.

If you’re working with a tax pro, ask her what documents you’ll need to gather to get the process rolling.

You can file your return as soon as it’s ready and this way you’ll get a refund sooner. And just think: This might be a nice boost to your savings as the average tax refund is $2,895 (this can vary by state.)

Consider Whether You Need an Extension. Need more time to file? You can ask for an extension. It gives you six more months to file, and pushes the deadline from April 15th to October 15th. Remember: Receiving an extension means you have more time to file, but payment for any taxes owed are still due by April 15th.

The More You Know

So there you have it. Both you and Cardi B now have a clear idea as to where those government tax dollars are going. It’s now your turn to file your tax return!

 

How to File Your Taxes Online 2019

It’s a new year. Time to get in shape, eat healthy, start a new side hustle, and…..prepare your taxes. Really? Really.

While the deadline to file 2018 taxes isn’t until April 15, now is a great time to get organized. This way, you won’t be the one stressed out and scrambling to get your taxes filed online by 11:59 pm on April 15.

Are you ready to organize your taxes and get your finances in shape? Take a look at our handy-dandy guide to filing taxes online and start the new year with a sense of accomplishment.

Figure out what income forms you’ll need

Most people will be dealing with either W-2 forms, W-9 forms or both. And, yes, the Ws can be confusing. Here’s a bit more information about these forms so you can determine which ones pertain to you.

  • If you are employed, you will get a W-2 form sometime in January. This form states the amount of money you earned in 2018, as well as how much you paid in federal and state taxes and other payroll deductions, including the amount you contributed to an employer-sponsored retirement plan. This is the main income form you’ll need when filing your tax return.
  • If you have a side hustle or started a business in 2018, you’ve likely provided your clients with W-9 forms. If you earn more than $600 with a particular client (who should have your W-9 on file), that client would then fill out a 1099-MISC form indicating how much you were paid for the year. A copy of this form will be sent to both you and the IRS. You will then report this income when you file your taxes online.

Figure out if what forms you’ll need to fill out

Form 1040

If you have a 9 to 5 job and will be receiving a W-2 this month, you may be able to take the standard deduction. For 2018, the standard deduction for individuals is $12,000 and $24,000 for married people filing jointly. If you use this standard deduction, you can’t also itemize deductions. Instead, you’ll take the standard deduction and fill out the new Form 1040 (prior to tax year 2018, there were two other options for shorter forms: Form 1040EZ and Form 1040A).

Form 1040 with schedules

If you’ve had a life change (got married, got divorced, had a child, started a business etc.), this may bump you into a different financial situation where you’ll need to take itemized deductions versus the standard deduction. If this is the case, you may need to fill out the new Form 1040, in addition to one or more of the new schedules. For example, if you have capital gains, unemployment compensation, gambling winnings, or any deductions to claim (including student loan interest deduction, self-employment tax, or educator expenses), you may want to fill out Schedule 1. To learn more about the new Form 1040 and the six schedules, check out this Q&A from the IRS.

If you will be filing schedules for 2018, then it’s important for you to prepare and organize your itemized deductions in advance. This will help you when it comes time to file your taxes online. If you’re a freelancer, you’ll definitely want to organize your deductible expenses. This can save you big bucks by lowering the amount you owe or perhaps even netting you a tax refund. Here are some of the more common itemized deductions:

  • Home mortgage interest
  • Charitable contributions
  • Medical expenses
  • Self-employment expenses
  • Home office and other associated deductions
  • Educator expenses

Figure out how you’ll file online

According to the IRS, nearly 90 percent of taxpayers now use tax software and the agency expects that the new Form 1040 and schedules will make online filing even easier. You can prepare and e-file for free using IRS Free File.

Alternatively, you can spend some money and use one of the more popular DIY tax software tools, like Intuit’s TurboTax.

If you want professional help, you can go with an authorized e-file provider in your area. To find a local tax preparer, you can do a search here with your zip code or state.

File early. Get your refund early.

If you think you may be getting a tax refund for 2018, this is more of an incentive to prepare your taxes and e-file early. The sooner you file, the sooner you’ll get your refund and you know what this means – more money in the bank. And, if you want your cash as fast as possible, make sure you use direct deposit. In fact, eight out of 10 taxpayers get their refund via direct deposit through the IRS.

Pro tip: Chime makes it simple for you to get your money early. Here’s how to get your tax refund faster with direct deposit:

  • Open a Chime bank account
  • Select “direct deposit” on your tax return software and include your Chime Spending Account and routing numbers. Make sure all information is accurate.
  • Sit back, relax and wait for your refund to appear in your bank account. According to the IRS, nine out of 10 direct deposit refunds are issued within 21 days (it typically takes eight weeks via snail mail). Better yet, you’ll get a text alert and email from Chime the second your refund hits your account.

Final word

We know that taxes are no fun. But, before the very thought of organizing your taxes causes you to break out in a sweat, take a look at the guide and resources here. (Pro tip: if you need more expert help, it’s advisable to seek out an accountant or tax professional).

Before you know it, you’ll be ready to file your taxes and set your sights on other financial goals this year.

 

How Long Does it Take to Get a Tax Refund?

Waiting for your tax refund to hit your bank account is no fun. In fact, you may be wondering whether there’s a faster way to get your money.

The answer is: yes. There is a faster way to get your tax refund and there are actual steps you can take to speed up the whole process. To help you get your money in the bank, take a look at how the tax refund process works. From here, you can take the necessary steps to receive your tax refund faster.

How long do tax refunds usually take?

The answer to this question is: It depends.

If you e-filed your return, you can expect to receive a faster refund through direct deposit. The IRS states that it can pay out most tax refunds within 21 calendar days after submission. Yet,  nine out of 10 people who e-file receive their tax refunds in three weeks or less..

If you prefer to file an old-school paper tax return, you can expect a longer processing period. The IRS states it takes about six to eight weeks to process a refund once it receives your tax return. So, if you want to get your refund faster, e-file with direct deposit. You may want to consider filing online through websites like TurboTax, TaxAct, and E-file.

Once you’ve e-filed your taxes, you will need to setup how you will receive your payment. And, if you want to make sure you get your refund as fast as possible, set up direct deposit (eight out of 10 tax refunds are received via direct deposit). If you’re a Chime member, all you have to do is choose “direct deposit” on your tax return software. You then can input your Chime Spending Account number and corresponding routing number.

From there, you just have to wait for your refund to show up in your bank account. Once your refund hits your account, Chime will send you a text alert and email. This way you will know that the money is there the second you receive it.

Tips for getting your refund faster

While there isn’t any way to guarantee exactly when your tax refund will arrive, there are a couple of ways to get it even faster.

First, file your completed tax return right away if possible (the deadline is April 15, 2019.) If you are missing W-2 forms (or 1099 forms if you are an independent contractor), then the process can take longer. So, at the beginning of January in any given tax year, be on the lookout for any forms you expect to receive. If you do not receive them by January 31, reach out to your employer or client and ask them to send these forms to you.

Furthermore, make sure you have the rest of your vital tax documents available and prepared in the event you need them.

Lastly, consider filing your taxes with a tax professional. While going to a professional won’t guarantee a faster tax refund, an expert is versed in the ins and outs of filing taxes and can  advise you on making the best decisions for your particular situation.

The most important takeaway: The sooner you file your taxes, the sooner you can receive your tax refund.

What to do if you still haven’t received your refund

If you still haven’t received your tax refund after three weeks’ time, there may be a few reasons why.

First, your tax return may have included errors, such as misspelled names, incorrect social security numbers, unsigned forms and more. To avoid errors, make sure to carefully review your tax return before you click submit. Another reason for a potential hold-up: Perhaps you were a victim of identity fraud. In this situation, the IRS may hold onto your return until it can work with you to rectify the situation.

If you still feel like things are moving slowly, here are three additional steps you can take:

  1. Use the IRS’ “Where’s My Refund?” online tool. It’s a quick and easy way to check the status of your tax refund. All you have to do is login to the IRS’ secure website. To access the system, you will need to input your tax filing status, your social security number and the amount you declared on your tax refund.
  2. Call the IRS to check on the status of your refund. To call the IRS, you can dial the hotline at 800-829-1964. Again, you will need to be prepared and provide your social security number, tax filing status and the amount of the refund you are expecting.
  3. Use the free IRS app, called IRS2Go. Similar to the online platform, you’ll need to enter the required information into the mobile tool. It’s never been easier to check your tax status while on the go.

Be smart with your refund

Before you receive your tax refund, be sure to create a plan for spending or saving your newfound cash.

While spending it on a vacation or new clothes sounds appealing, it may be wiser to save your tax refund for future use. To get the most bang for your buck, consider opening a savings account through Chime. This way you can continue to grow your cash.

 

 

The Fastest Way to Get Your Tax Refund Check

It’s officially January, which signals the beginning of everyone’s favorite part of the year: tax season, or as we like to think of it, refund season!

Tax season can be stressful, but did you know that nearly 80% of people who file a return will receive a tax refund check? Yes. You read that correctly. Uncle Sam has refunded an average of $3,120 over the past few years. If you’re eagerly awaiting that big payday like most Americans, you’ll want to receive your reimbursement ASAP. Below we’ve outlined the fastest way to deposit your tax refund check with Chime.

Why wait for a tax refund check in the mail, when you can have it automatically deposited directly into your Chime Account?

One of the best ways to ensure that you receive your refund check quickly is by electing to e-file with direct deposit. According to the IRS it’s “the fastest way to get your tax refund check.” Filing with direct deposit is convenient and easy. Here’s a quick step-by-step guide to getting your tax refund direct deposited to your Chime Spending Account:

Step 1: Get your Spending Account and Routing Numbers. 

First things first. Get your bank account information:

  • Open the Chime app on your phone or login to your Chime Account on the web.
  • Visit the ‘Direct Deposit’ section under ‘Move Money’ to view your Spending Account and routing numbers.
  • If you need a copy of your account information, you can also email, print, or download your direct deposit form. The form which has your account information needed for direct depositing your refund.

Step 2: Include your Spending Account information when you file your return.

If you’re using a tax software, like TurboTax or Quickbooks, you’ll be presented with options as to how you would like to receive your tax refund check: direct deposit or check by mail. Select direct deposit and make sure to include your Spending Account and routing numbers. If you are having your taxes filed by a professional, let your tax preparer or accountant know that you want to receive your tax refund check via direct deposit and provide them with your account information.

Be sure to double, triple, and quadruple check the information provided to avoid any errors which could delay your refund.

Step 3: Get notified the instant your refund arrives.

When you e-file your return and select direct deposit as your payment option, expect to receive your refund within 21 days. The IRS issues 9 out of 10 direct deposit refunds within 21 days, as opposed to waiting 8 weeks for a check via snail mail. The moment your refund is deposited to your Spending Account, we’ll send you an email and an alert to your phone. If you think it’s taking too long to get your refund, you can always check on your refund status with the IRS’s nifty refund tracker.

The deadline for filing your return is April 15th, but the sooner you file, the sooner you’ll get your refund. Following these tips will ensure you follow the IRS’s recommendation on the fastest way to deposit your tax refund check and be the envy of all your friends.

 

7 Tips to Help You File Your Taxes for the First Time

Taxes are a necessary evil.

You may not want to file taxes, but you’ve got to do it. And, if you don’t, this may come back to haunt you as evading your taxes can carry criminal charges and some hefty fines.

Nonetheless, filing taxes can be stressful, especially if this is your first time dealing with a tax return. Here are 7 tips to help you file your taxes.

Gather Your Forms

If you are an employee, you’ll need your W-2. If you’re an independent contractor, you’ll need your 1099 forms. Also, gather other pertinent information like your health insurance paperwork, tuition statements (if you’re in college), mortgage and bank statements, and any other tax-related documents.

Lastly, if you want to itemize business expenses, make sure you have this information on hand as well. This includes receipts and even statements that show you’ve collected payments for renting out part of your home. This way, you’ll be ready to file your taxes.

Lastly, keep in mind the new tax rules for 2019.

Know What You Qualify For

Did you pay interest on any student loans last year? Did you have a baby? Did you move out of state for a job?

Regardless of how your life changes, it’s important to know which tax breaks may be available to you. Now is the time to do your research and learn about the different tax credits and deductions that you may be eligible for when filing your taxes.

Don’t Wait Until the Last Minute

The official deadline for filing taxes is April 15th every year, unless the 15th falls on a weekend or holiday. This may or may not be extended like last year (we were given two extra days to file in 2018).

Even if you have to mark this date on multiple calendars, don’t forget it! Why? If you file your taxes late, you may incur penalties for not filing on time.  

To prepare, try to have all of your documents ready to go at least a month in advance.

You Can File An Extension

Need more time? If so, you may need to file an extension and the deadline to do this is the same date taxes are due – April 15. The IRS allows you to file an extension – for free – using one of their endorsed websites. These websites walk you through the steps you need to follow when filing for an extension. If you still aren’t sure what to do, it’s important to seek help from a tax professional.

Use a Software Program

Still scared to file your taxes? If you’re computer savvy, you may want to try using an online program, like TurboTax, H&R Block Online, or TaxAct Online.

Online tax programs like these offer automatic importing of your W-2. They also offer self-employment filing options for business owners who need industry-specific deductions or need to track self-employment expenses.

If you’re using a software program and need a little extra hand-holding, you can try calling the online company to speak to a professional. Just make sure you are aware of any possible fees involved.

Hire a Professional

If using an online software program isn’t your cup of tea, it’s a good idea to work with a tax professional. When you hire a tax advisor or accountant, this person will prepare your taxes for you and even help you find deductions to help reduce your tax bill. Better yet, a tax professional may help you get a bigger refund. While you’ll have to pay your tax preparer, you’ll likely worry less.

Prepare For Next Year

Once you’re done filing your taxes for the first time, make sure you start preparing ahead for next year. For starters, keep your 2018 tax information on hand for future reference and make sure that you’re claiming the right deductions on your W-4 form. You can always change this by calling your employer human resources department.

If you’re self-employed, remember to keep records for all of your expenses. This way, filing your 2019 taxes will be much easier. Just think: you’ve made it through your first tax return! Now you know what to expect and you’ll be able to approach next year’s taxes with a bit more peace of mind.

 

Tax Professional or DIY? Here’s How to Choose

The thought of filing taxes on your own can be daunting. At the same time, hiring a professional accountant comes at a price: around $273 of your potential refund.

But, with the availability of low-cost online options – like TurboTax and TaxAct – you may still be wondering if hiring a tax professional makes the most sense for you. To help decide which way to go when filing your taxes, here are a few questions you should ask yourself.

Have you experienced any life changes this year?

Major life changes can definitely be a reason to seek out the help of a professional tax preparer as these events have the potential to complicate the tax filing process. Here are a few lifestyle shifts that may prompt you to hire an accountant:

  • You had a baby. While it’s fairly easy to input the child tax credit on regular tax software, if you had a baby within the last year, you may want to seek out a professional to help you figure out possible medical deductions pertaining to your child’s birth. You may also be able to deduct childcare costs.
  • You moved. Whether you moved across the street or across the country, if your relocation involved the purchase or sale of a home, you may want to get in touch with a tax professional to make sure you’ll benefit from possible tax breaks.
  • You earned more money. If your income spiked significantly in the past year (especially if you made over $250,000), you may benefit from the help of a professional. Why? Taxes often get more complicated as your income rises, and a professional who understands the tax code can often help out.

Do I feel confident doing my own taxes?

You may be great with a budget and managing your money, but taxes are an entirely different beast. If you have a simple return with only your W-2 information to input, you may be ok filing on your own. But, if you started up a new business or have a side hustle in addition to your job, it may be worth the peace of mind to hire a professional.

Also, if you’re going through the free filing process and find that you’re second guessing yourself, it’s time to outsource your taxes. Keep in mind that working with a pro can help you find deductions you never knew existed — like the ability to deduct home office space used to run your side hustle or moving expenses incurred for a new job.

Am I ready to deal with the IRS?

If you are filing solo, even if you feel certain you did everything right, there is no guarantee that you won’t get audited by the IRS. The audit process can be time consuming, nerve-wracking, and costly. Also, if you’re the one preparing your taxes, you’re on the hook should an auditor come calling.

If a tax professional prepares your taxes, this person or firm will be required to defend your return to the IRS. Instead of you, your accountant will be the contact person required to answer questions posed by the IRS, even though you’ll ultimately be on the hook for any amount owed. For this reason alone, hiring an accountant may be worth it.

How much time do I have?

The average time it takes to complete a tax return, according to the Washington Post, is about 13 hours. If you’re already strapped for time, you may want to consider outsourcing this work. And, if you do want to prepare your taxes on your own, make sure you get organized early and set aside plenty of time to file before the April 17th deadline.

Make a decision and start planning

The earlier you plan for tax season, the better off you’ll be. Weigh the pros and cons now to help you decide whether to file alone or hire a professional. And, one final tip: make sure you sign up now for a Chime account. This way, you can get your tax refund deposited directly into your account. Better yet, you’ll get your refund in three weeks rather than waiting for two months.

 

Easy Money: How to File Taxes in 2018

Welcome to Easy Money, where we make super-complicated financial stuff simple(r) to help you do it better.

Whoa, boy. Republicans have everyone confused about taxes. That’s what happens when you pass a massive system overhaul less than a month before W-2 forms go out. (Thanks, Congress!) Here’s the thing, though: The tax bill won’t directly affect the taxes you file this year. Most provisions go into effect Jan. 1, 2018, but they’re not retroactive — and your 2017 taxes are due by April.

So, as we talk tackling taxes this year, a lot of information will look old hat. But don’t worry: We’ll note some of the big changes on the way — and how they can influence your 2017 tax return.

Let’s dive in.

First, get your ish together

To file, you need any applicable:

  • W-2s,
  • 1099s, which report other income, like interest and dividends or self-employment wages
  • 1098s, which report stuff you can deduct, like mortgage interest or tuition expenses
  • Documentation for other deductions you want to take, like receipts for charitable donations
  • Your 2016 tax return
  • Bank account and routing number, if you want the IRS to direct-deposit your refund
  • Your adjusted gross income (AGI), which is basically your gross income (including any interest you’re including on 1099s), minus “above the line” deductions, most notably, retirement plan contributions, alimony, medical expenses and unreimbursed business expenses. Sounds complicated, but your 1040 walks you through calculating AGI.

Next, bookmark these dates

  1. Expect last year’s W-2s by Jan. 31, 2018.
  2. Your 2017 taxes are due by April 17, 2018. (Not a typo. You get two extra days this year because April 15 is a Sunday and April 16 is Washington D.C. Emancipation Day.)
  3. If you need more time, you must file for an extension by April 17, 2018.
  4. If you get an extension, your tax returns are due by Oct. 15, 2018. But don’t get it twisted: That extension only applies to your paperwork. If you owe the Internal Revenue Service money, you must pay by April 17, 2018.

Figure out your filing status

There are five options, pretty much determined by your marital status on the last day of the year.

  • Single Filing Status, meaning you’re not married, divorced or legally separated
  • Married Filing Jointly, meaning you’re married and filing a return with your spouse
  • Married Filing Separately, meaning you’re married, but not filing a return with your spouse
  • Head of Household, meaning you’re not married, but have paid more than half the cost of maintaining a home for yourself and a qualifying dependent
  • Qualifying Widow/Widower, meaning your spouse died within the last two years, you haven’t remarried and you have a dependent child

Your filing status is mostly straightforward. If you’re single, file single. If you’re a head of household, file head of household. If you’re a recent-ish widow(er) with a dependent, file qualifying widow(er). If you’re married, you’ve got a choice to make. Most couples score the bigger tax break by filing jointly, but there are reasons to file separately. Here’s a high-level overview of filing together vs. filing solo.

Why married couples file jointly

  1. For a higher standard deduction (more on this in a few)
  2. To reduce what you owe, since higher tax brackets kick in sooner when you file separately
  3. To qualify for certain deductions you can get more easily when filing jointly, like the Child & Dependent Care tax credit

Why married couples file separately

  1. To separate your tax liabilities (say, you’re worried your spouse is evading Uncle Sam)
  2. To score a significant itemized deduction one spouse can’t take were the couple to combine incomes (some deductions are limited by your adjusted gross income)
  3. One spouse has debts subject to refund seizure or an income-based payment (like student loans)

We can’t tell you what to do. You — or your tax preparer — need to look at your finances and crunch the numbers. Having said that, you may want to crunch the numbers, i.e., prepare your tax returns both ways to see if it’s better for you to file jointly or separately. Yes, that’s extra work. It’s also the best way to know how to come out ahead.

Know the tax brackets

OK, remember, we’re talking about filing taxes in 2018 for 2017, so you’re subject to the tax brackets in place before the Republican-led tax reform. Here they are.

tax-brackets-2017

Now, here’s the thing about tax brackets: They’re not all that straightforward. (Who’d a thunk it, right?) You don’t make, say, $80K and get taxed at 25% for all those dollars. The system’s progressive. So, assuming you’re single, the first $9,325 you make gets taxed at 10%, the next $9,326 to $37,950 gets taxed at 15% and the remaining amount (given the next tax bracket, for 2017 at least, is $37,951 to $91,900) gets taxed at 25%.

This is confusing, but also important so (a) you don’t try to needlessly claw your way into a lower tax bracket and (b) you get an accurate estimate of your tax bill before you must pay it. Part B is all-the-more important as we head into 2018, since the tax brackets are changing. (The progressive system is not.) Effective Jan. 1, 2018, they become:

2018-brackets

Decide if you’re taking the standard deduction

Deductions lower your taxable income. The standard deduction is the most basic way to approach this. In lieu of listing every qualified expense that ate into your net worth during the year, you claim a fixed amount associated with your filing status. For tax year 2017, the standard deduction is:

  • $6,350 for single filers
  • $6,350 for married filing separately
  • $12,700 for married filing jointly
  • $9,350 for heads of households

Flash forward: The GOP tax bill practically doubles the standard deduction for all filers, so for tax year 2018, it’s $12,000 for singles and married people filing separately, $24,000 for married couples filing jointly and $18,000 for heads of household.

If you don’t take the standard deduction, you’re itemizing. People itemize when (a) their deductions exceed the standard deduction and/or (b) they can’t take the standard deduction, because there are exemptions. For example, someone who’s married filing separately is ineligible if their spouse itemizes deductions. If you’re itemizing, you need to …

Know your deductions & exemptions

Let’s start with deductions. There are a bunch of them, but, for the sake of simplicity — which, again, is what we’re going for — here are the most common ones. By the way, a lot of these deductions, though totally fair game this year, are changing in tax year 2018. We’ll flag some of the bigger changes as we go.

Mortgage interest deduction: You can deduct the interest paid on up to $1 million in mortgage debt on your primary home and, sometimes, a second one. Flash forward: The GOP tax bill lowers the cap to $750,000 of mortgage debt, though it’ll stay at $1 million for mortgages made before Dec. 15, 2017.

State & local tax (SALT) deduction: Itemizers can deduct state income, sales and property taxes. Flash forward: The GOP tax bills caps the SALT deduction at $10,000, starting next year — which is why people were rushing to prepay 2018 property taxes in December.

Student loan interest deduction: You can deduct up to $2,500 of interest paid on student loans.

Charitable donations: Itemizers can deduct donations made to eligible organizations. The deduction can’t exceed 50% of your adjusted gross income (or 30%, in some instances). Plus, you’ll need the receipts.

Medical expenses: You can deduct out-of-pocket medical expenses exceeding 7.5% of your adjusted gross income. That’s a result of the GOP tax bill, which lowers the threshold from 10% for tax years 2017 and 2018. It goes back up for most Americans in 2019.

Health savings account contributions: Money put into an HSA, which helps with out-of-pocket medical expenses, is tax-exempt. In 2017, you can deposit up to $3,400 if you’re a single filer or $6,750 for families.

Individual retirement contributions: You can deduct Roth and traditional individual retirement account contributions, depending on your income, filing status and whether you have a retirement plan at work. Contributions are limited, too: In 2017, you can put up to $5,500 or, if you’re age 50 or older, $6,500, into an IRA account. You can see if qualify for a full or partial deduction here on the IRS website.

Genius tip: You can make retroactive HSA and IRA contributions up until April 17, 2018, so there’s still time to score those tax breaks.

Moving expenses: You can deduct some moving expenses if you relocated because of a job change. Flash forward: This deduction is donezo next year, thanks to the GOP tax bill, which suspends it through 2025.

Exemptions also reduce your taxable income, but, for individuals filing taxes, there are really only two of them.

  1. You can claim a personal exemption, so long as no one else is claiming you as a dependent. The personal exemption in 2017 is $4,050, but it starts to get lower once your adjusted gross income hits $261,500 ($313,800 for married couples filing jointly) and is null and void if your AGI is $384,000 or higher ($436,300 for married couples filing jointly.)
  2. You can also claim a dependent exemption, if, you know, you have dependents. That usually means children, but there are other scenarios where a relative qualifies. In 2017, you can deduct $4,050 for each dependent.

Flash forward: The GOP tax plan does away with the personal exemption, starting next year through 2025. The impact this could have on your taxes will vary, because, remember, the standard deduction nearly doubles next year. Still, itemizers and families, especially, should discuss with their tax preparer whether it’s worth adjusting their withholding for 2018.

Don’t forget credits

Credits, unlike deductions, get subtracted from your actual tax bill, not your taxable income. Tax credits come in two flavors: refundable and non-refundable. Refundable credits can reduce your liability beyond $0. Non-refundable credits don’t. There are a bunch of credits, too, but here are the most common.

Earned income tax credit: A refundable break for low-to-moderate income families; the amount varies based on your number of children and income. There’s a bunch of boxes you need to check off to qualify for the EITC, but, as a benchmark, if your earned income and AGI exceeds $53,930, you’re definitely not eligible.

Child tax credit: A non-refundable credit of up to $1,000 per qualifying child; eligibility is determined by age, relationship, family income and more.

Child & dependent care credit: A non-refundable credit for paying someone to look after a dependent while you work; the amount is between 20% and 35% of your allowable expenses ($3,000 for one dependent; $6,000 for two or more), depending on your AGI.

Savers credit: A non-refundable tax credit that offsets the first $2,000 low-to-moderate income workers save for retirement. Eligibility varies by filing status and AGI.

American opportunity credit: A partially refundable tax break for students paying for college. The maximum annual credit per student is $2,500.

Lifetime learning credit: Another tax break for students, this non-refundable credit is worth up to $2,000, depending on income and filing status.

Mind your penalties

This is the stuff that’s gonna up your tax bill. Penalties aren’t abundant, per se, and you’re probably familiar with most of them, but here’s an overview of what can jack up your tax bill.

Early withdrawals: In most cases, if you withdrew money from a retirement account during the tax year and you’re not 59-and-a-half, you must pay an additional 10% early withdrawal tax. There are some exemptions, though. For instance, first-time homebuyers can take up to $10,000 out of an IRA for their house, sans penalty.

Missed minimum distributions: Conversely, once you hit age 70-and-a-half, you have to start withdrawing from retirement accounts, including 401(k)s, traditional IRAs, SEP IRAs and SIMPLE IRAs. If you didn’t make your minimum distribution by Dec. 21, 2017 (or April 1, 2018 if you turned 70-and-a-half this tax year), you’ll pay a 50% excise tax. Minimum distributions vary by age and marital status.

Failure to file/failure you to pay: The exact charge depends on where you went wrong (failure to file costs more), how long you go AWOL, how much you owe and whether you enter a payment plan. There are also penalties for bouncing checks, underpaying or misreporting what you owe.

Filing late: If you miss the April 17 deadline — and didn’t get an extension — you face a penalty of 5% of the unpaid taxes each month the return remains late. That penalty accrues the day after your due date, but won’t exceed 25% of the unpaid taxes.

Not having health insurance: Yes, the GOP tax bill repealed Obamacare’s individual mandate, but it was still in effect for tax year 2017, so, if you went without a health care plan last year, you face a penalty of either 2.5% of your taxable income or $695, whichever is greater. In fact, you’ll face a penalty in tax year 2018, too. The repeal doesn’t take effect until 2019.

Get ‘er done

OK, now you (more or less) know what’s up, it’s time to file. And, again, you have a choice to make: How should you do your taxes? The best option varies, depending on how much time you have, how complex your returns are and how tax-savvy you are. Still, technically, everyone has three options.

  1. Do-it-yourself: Yeah, going old-school probably isn’t your best bet if your taxes have a lot going on. However, if you’re filing via a 1040EZ — meaning you make under $100,000, are filing single or married jointly and don’t have any dependents — or even fairly straightforward 1040, you could give it a go. It’ll certainly save you some dough: Filing via good old paper and pen pretty much only requires paying for postage. (You can download all the forms you need from the IRS website.) But, if you make under $66,000 a year, you can actually e-file for free. There are volunteer groups, too, that work with the IRS to provide free tax assistance to qualifying individuals.
  2. Use tax software: If your taxes are all Baby Bear (you know, not too hard, but not too easy), basic tax software is probably the way to go. It’ll take a little time, but you’ll pay less for the goods than you would to a tax preparer.
  3. Hire a professional: If you’ve got a complicated estate, the expertise of a reputable, licensed tax preparer is probably worth their fees. Ditto for if you have zero time to do your taxes. But notice how we specify using a reputable tax preparer. That’s because there are, unfortunately, plenty of scammers out there. To avoid getting got, make sure a prospective preparer has a Preparer Tax Identification Number (they’re required to by law). And check with the Better Business Bureau or online review sites to see how past clients rate them.

Recommended reading

To help you build your expertise, here are some useful tax resources from around the web.

For more life & money tips, visit our Moneygenius magazine.


This article originally appeared on Policygenius.
Image: Yuri_Arcurs

 

The Fastest Way to Get Your Tax Refund Check

It’s officially 2018, which signals the beginning of everyone’s favorite part of the year: tax season, or as we like to think of it, refund season!

Tax season can be stressful, but did you know that nearly 80% of people who file a return will receive a tax refund check? Yes. You read that correctly. Uncle Sam has refunded an average of $3,120 over the past few years. If you’re eagerly awaiting that big payday like most Americans, you’ll want to receive your reimbursement ASAP. Below we’ve outlined the fastest way to deposit your tax refund check with Chime.

Why wait for a tax refund check in the mail, when you can have it automatically deposited directly into your Chime Account?

One of the best ways to ensure that you receive your refund check quickly is by electing to e-file with direct deposit. According to the IRS it’s “the fastest way to get your tax refund check.” Filing with direct deposit is convenient and easy. Here’s a quick step-by-step guide to getting your tax refund direct deposited to your Chime Spending Account:

Step 1: Get your Spending Account and Routing Numbers. 

First things first. Get your bank account information:

  • Open the Chime app on your phone or login to your Chime Account on the web.
  • Visit the ‘Direct Deposit’ section under ‘Move Money’ to view your Spending Account and routing numbers.
  • If you need a copy of your account information, you can also email, print, or download your direct deposit form. The form which has your account information needed for direct depositing your refund.

Step 2: Include your Spending Account information when you file your return.

If you’re using a tax software, like TurboTax or Quickbooks, you’ll be presented with options as to how you would like to receive your tax refund check: direct deposit or check by mail. Select direct deposit and make sure to include your Spending Account and routing numbers. If you are having your taxes filed by a professional, let your tax preparer or accountant know that you want to receive your tax refund check via direct deposit and provide them with your account information.

Be sure to double, triple, and quadruple check the information provided to avoid any errors which could delay your refund.

Step 3: Get notified the instant your refund arrives.

When you e-file your return and select direct deposit as your payment option, expect to receive your refund within 21 days. The IRS issues 9 out of 10 direct deposit refunds within 21 days, as opposed to waiting 8 weeks for a check via snail mail. The moment your refund is deposited to your Spending Account, we’ll send you an email and an alert to your phone. If you think it’s taking too long to get your refund, you can always check on your refund status with the IRS’s nifty refund tracker.

The deadline for filing your 2017 return is April 17 but the sooner you file, the sooner you’ll get your refund. Following these tips will ensure you follow the IRS’s recommendation on the fastest way to deposit your tax refund check and be the envy of all your friends.

 

Are You a Freelancer? These 9 Tax Deductions May Save You Money

Are you a home-based freelancer or do you have a side hustle? If so, you know the benefits of being your own boss, including flexible hours and no commute – unless you count walking from your bed to your desk.

Yet, along with these perks comes a tedious task: filing taxes for your business. In fact, dealing with your taxes may be so daunting that you haven’t even started to organize your year-end books or figure out which tax deductions you can take. Luckily, you still have time and this is one task that is certainly worth it. Why? Tax deductions can lower the amount you owe Uncle Sam or perhaps net you a refund. Either way – this can mean more money in the bank for you. So, stop procrastinating and take a look at our top 9 tax deductions for freelancers.

1. Home office

If this marked your first year freelancing, you may not realize that you can deduct home office expenses even though you don’t have a separate “office” in your residence. Although a dedicated office is ideal, this may not be an option if you live in an apartment with roommates. Luckily for you, you can allocate a corner of your dining room or even your bedroom as your workspace. According to the IRS, you can deduct a portion of your rent or mortgage for the room or space that is used exclusively for business purposes. For example, the square footage of my home office equates to about one-eighth of the total square footage of my house. This means that I can deduct about 12 percent of my mortgage payments.

2. Home office supplies, equipment, and furnishings

Talking about a home office, you can also deduct expenses related to the purchase of home office supplies and computer equipment. This includes office furniture like a new stand/sit desk – my big ticket office expense in 2016. I researched affordable electronic desks and purchased one for $669 at Ikea. But, guess what? It was money well-spent as my back fatigue is now gone plus I get to write it off as an office furnishings expense. Besides a new desk, other big-ticket office items may include an ergonomic chair, a printer, or a new laptop. And, don’t forget about smaller everyday office supplies like printer paper, notebooks, paper clips or anything else you need to run your business. These are all typically deductible too.

3. Utilities, wireless and other related services

Just like you can deduct a percentage of your mortgage or rent as home office space, you can usually do the same thing for utilities and other household bills. For example, you can typically deduct the portion of your electricity, gas, cable, wireless and cell phone bill used to conduct business. Just make sure you keep accurate records and remember: Your personal household bills are not deductible.

4. Insurance

This is an expense that is often overlooked, especially if you’re a newly minted freelancer. Yet, if you have any type of insurance that extends to your business, it may be tax deductible. This can include insurance paid for liability, theft, worker’s compensation, malpractice, disability, and maybe even health insurance premiums. For example, I carry fitness liability insurance as I teach yoga classes on the side. When I used to operate a home-based yoga studio, I also had an umbrella policy, which offered my business an extra layer of protection above and beyond my homeowner’s insurance policy.

5. Automobile expenses

Do you drive your car to visit clients or meet prospective customers? Or, perhaps you rack up hundreds of miles driving for Uber or Lyft? Regardless of whether you’re a Lyft drive or a roving fitness instructor, if you put miles on your car for business, you can either claim the actual car expenses or deduct the standard mileage rate of 56 cents per mile during 2016, according to the IRS. If you decide to claim the actual expenses for your car, don’t forget to include gas costs for traveling to business-related events and meetings, as well as expenses related to oil changes and repairs.

6. Travel costs

If you traveled to meet with clients or to attend events, conferences and trade shows, you can usually deduct related hotel bills, airline travel, or other associated expenses. You can also deduct 50% of your business meals or entertainment, according to the IRS. For example, if you take a prospective client for lunch, you can normally deduct 50% of the restaurant bill.

7. Supplies related to your business

Do you run a craft business on Etsy? Or perhaps you have a side hustle refurbishing old furniture? Regardless of what type of business you run, if you sell merchandise, you can often deduct material costs. In addition, you can deduct the amount you spend on merchandise for your business. In my situation, I deduct the cost of yoga props and other fitness equipment that I use for my classes.

8. Marketing

Did you create and print marketing materials for your business, including brochures, flyers, mailers or business cards? If so, these are typically tax deductible. In addition, you can usually write off costs for online advertising through platforms like Facebook, Twitter, and Google. And, don’t forget about paid email marketing using Constant Contact or other similar channels. This form of marketing is also a viable tax deduction.

9. Professional service fees

Did you hire a lawyer to help you incorporate or an accountant to handle your bookkeeping? If so, you can usually deduct these professional fees. You can also normally deduct fees for other professionals you hire for your business, including an SEO expert or graphic designer.

Regardless of which deductions seem appropriate for your business, it’s a good idea to seek advice from an accountant or financial advisor. And, keep this in mind: The cost to hire a tax expert may be tax-deductible. A win-win.

 

3 Common Mistakes People Make When Filing Taxes and How to Correct Them

Spring is here, March Madness is in full swing, and it’s no longer pitch-black before dinner. All good stuff. But for me, March means crunch time – or rather, time to organize and file my taxes. I’d rather be doing just about anything else, including cleaning out my basement.

Indeed, filing taxes can be stressful. If you’re still procrastinating or worrying about making mistakes on your tax return, you’re not alone. To help you file your taxes correctly and put your mind at ease, we’ve pinpointed three common mistakes. Read on to learn how you can avoid making them.

 1. The Math Doesn’t Add Up

According to Forbes Magazine, math is one of the first things the IRS checks for on tax returns. In other words, your numbers should add up correctly. Sounds easy, right? Yet, entering figures onto forms can make your eyes glaze over and before you know it, you’ve transposed a number or two. Seemingly small mistakes can add up. Not only can a math error trigger a correction notice from the IRS, but it can potentially delay an expected refund. Mathematical errors might also result in a lower tax refund than you were counting on. Worse yet, you might even end up owing money to the IRS.

How to Avoid Making Math Mistakes

  • If your taxes are pretty simple – as in you’re an employee and receive a W-2 form, you don’t own a home and you don’t have a large stock portfolio – the simplest solution is to use tax software from companies like TurboTax, H&R Block, or TaxSlayer. The calculators on these platforms will add up your figures and help ensure that your math is accurate. Most tax software programs offer free versions as well as more immersive options that you’ll have to pay for. Yet, if you earned less than $64,000 in 2016, you can file your taxes using the IRS’ Free File software.
  • Hire an accountant. It’s hard to beat free or low-cost tax filing software. However, if you’re a married freelancer like me with piles of 1099 tax forms stating your self-employment earnings, a house, dependents, and investments of some nature, you may need a little more hand-holding. Years ago, I hired an accountant and have never looked back. Every March, I gather my information, fill out a tax organizer, and drop off a big thick folder to my CPA’s office. From there, I let him do the math.

2. You Forgot or Neglected to Report Income From All Sources

If you’re a freelancer or an employee who has a side hustle, like driving for Uber or Lyft, you probably received one or more 1099 forms this year. These forms state the amount of untaxed money you made. At the same time, if you earned interest income in a savings or investment account, you’ll receive a 1099 for that as well.

While it’s certainly easier to exclude your 1099 income on your tax return, this can throw up a red flag with the IRS – not to mention that neglecting to report all of your income can result in a penalty.

How to Avoid Inaccurate Reporting

  • Stay organized and as soon you receive 1099 forms, put them away in a folder. If you are missing a 1099, call the business and ask for one. Companies are required to send 1099 forms to all independent contractors who earned in excess of $600 during the tax year.
  • Prepare to do some extra legwork and fill out all necessary forms to report your additional earnings. It’s also important to understand that the IRS receives copies of all of your 1099s. This means the government knows how much you earned and your tax return should reflect this accurately. Another tip: Extra forms can seem overwhelming and tax software can help you stay on point.  
  • This may sound like a broken record, but if you need extra help, hire an accountant. For me, launching my freelance career was the tipping point that led me to hire a CPA.

3. You Didn’t Enter the Correct Banking Information

If you’re expecting a tax refund, the easiest way to get your cash fast is to have the funds directly deposited into your bank account. Yet, in order for the money to go into your account, you need to enter the correct bank account information and routing number on your return. Yup, more numbers. What happens if you fill out the wrong account number? Your refund may get sent back to the IRS or end up in someone else’s bank account. You’ll then have to spend your time trying to track down your money and this is no fun.

How to Avoid Problems with Your Direct Deposit Refund

  • Triple-check your account and routing number for accuracy and then e-file your return, designating on the tax form that you want to receive your refund via direct deposit. For example, to look up your spending account number at Chime, all you have to do is log onto the website or open the app on your phone and go to the “Move Money” tab. From there you can see your account number and routing information under “Deposit Funds.”
  • If you opt for direct deposit on your tax return, you can expect to receive your refund from the IRS within 21 days. This is the fastest way to receive your money, according to the IRS. If you haven’t received your money within this time frame, it’s time to check on your refund status through the IRS’ refund tracker tool. Some banks, like Chime, will send you an email and text alert as soon as you receive a deposit.

According to the IRS, 83% of tax filers received a refund in 2015, This means that you’re more likely to get a refund than owe money to Uncle Sam. Yet, it’s always a good idea to be prepared with money set aside to pay taxes – just in case. With this in mind, there’s no time like the present to take advantage of automating to boost your savings, To help you save without even thinking about it, Chime rounds up each of your transactions to the nearest dollar and stashes this into your savings account. With automated savings and a possible tax refund in your future, this will give you some newfound cash to sock away. A sweet reward for avoiding pitfalls this tax season.

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