So every year there are some questions that tax payers want to ask, but the questions seem a bit trivial. Here are some answers to those seemingly simple questions that seem trivial but are actually very important things to know about the coming tax year.
I get asked all the time, “Do I really have to file a tax return this year?” My general response is “probably.” The exception is if your income is less than your personal exemption plus your standard deduction. Both of those are determined by age and marital status. Typically, that would be an approximate annual income of $23,100 dollars. I always follow up with the statement that even if you don’t have to, you probably should, because you could be entitled to some extra cash that Uncle Sam is doling out. If you qualify for some of these exemptions, it could result in a nice refund that you can put away for a rainy day. Earned Income Credit for example pays money to people who qualify, even in the event that the credit exceeds their tax bill.
Another question is “when do I have to file?” Usually it is April 15th of each year, unless it falls on a weekend or a holiday. For 2016, the filing date was April 18th, due to a holiday observed by Washington D.C. You can file a 6-month extension, as long as you remember that the extension is not an extension to pay what you owe. You still will have to pay on April 18th. If you do not pay on that date, you will be charged with a failure to pay penalty.
A question that all filers who are entitled a refund ask is “how soon will my refund get here?” Typically, most refunds arrive within 21 days of the date of filing.
Here’s a question we all want to know. “Can the IRS withhold my refund and what are the reasons for that?” Yes, it is true that the IRS can withhold all or part of your refund. This can happen for 4 reasons. Those being if your behind in your child support, state income taxes, your federal student loans or if you received too much of a government subsidy to buy health insurance.
A very scary question I often encounter is, “What if I know I owe money to the IRS but can’t afford to pay?” Even if you can’t pay, file anyway. Otherwise you will incur a failure to file penalty. And that can be expensive. The IRS has different payment options available so you don’t have to come up with all the cash up front. In any situation, you may want to consult a tax professional to help get you through this problem.
The last question I often hear is, “Will I get audited?” My response is probably not. But that response comes with a caveat. Audit rates happen to be very low these days. But if you are inconsistent and don’t repot items that appear on other tax forms, it could trigger an audit. The IRS uses an automated form matching system that cross checks the numbers on your return with numbers that it has on file, such as information from employers, banks, brokers and educational institutions.
All in all, these answers should help when you are figuring out a strategy to deal with your taxes for the coming years. Good luck and happy savings!