Even though we have taxes due every year, we always have some questions. The tax code changes frequently, and it’s extremely complex. Here are some of the most common tax and tax season FAQs. How Can I Lower My Tax Bill? Far and away, the biggest tax questions are always some variants of “How can I lower my taxes?” and “What deductions am I eligible for?” Tax deductions and credits are the most common way to reduce your tax obligation, whether you are doing your individual or business taxes. The hard part about this question is that it’s different for everyone. A lot of your tax information comes in the form of Information Returns, the forms like 1099s, 1098s, W-2s, and others that show you what your financial activity looked like throughout the tax year. These Information Returns help you fill out the tax forms you need in order to take advantage of many of these deductions and tax credits. eFile360’s top-tier e-filing services offer you a great solution for filling out and storing these forms. What Are This Year’s Tax Changes? Every year, the IRS makes adjustments to the tax laws, processes, and procedures based on the latest government regulations, technology changes, and overall performance during the last tax season. This tax question is one that people are worried about all the time. American taxes are like a high-level puzzle: you have to put all the pieces together, solve the equations, and hopefully submit the right answers. But if the rules have changed, you may be making inadvertent mistakes. The IRS website, specifically their Newsroom, is a great way to stay up-to-date on any and all changes that are coming up during the next tax season. What’s the Difference: W-2 vs. 1099-NEC? The 1099-NEC is one of the newest Information Return forms to be (re)instated. These forms are used to calculate non-employee compensation, including freelancer and independent contractor work. W-2s are given to employees of a business early on during tax …
FAQs for Filing Taxes
No matter who you are or what you do, you’re going to have tax questions. Let’s take some time to go through the most frequently asked questions for filing taxes. Are Unemployment Benefits Taxable? In 2020, the unemployment rate reached 14.8%, which is the highest rate observed since data collection began in 1948. And many people had to include unemployment benefits in their 2020 (and possibly their 2021) tax returns. Typically, unemployment income is taxable. If you collected unemployment payments, you will receive Form 1099-G which will show your total payments. It is also worth noting that under the 2021 American Rescue Plan, the first $10,200 (or $20,400 if married filing jointly) of unemployment income was tax-free on your 2020 taxes. No word yet if those provisions will carry forward to the tax year 2021 returns. What Is Self-Employment Tax? Self-Employment tax is a separate tax from your typical personal returns. It is a self-employed person’s version of the FICA tax, in which the independent contractor is responsible for paying for Social Security and Medicare. This is important to remember because those who are self-employed are responsible for both the employer and employee portion of the tax. Do I Need a FEIN for my Home Business? If you run a business out of your home as a sole proprietor, you don’t need a Federal Employer Tax ID Number. You can use your personal Social Security number. Any other business setup, however, will require you to set up a FEIN. What Are the Tax Ramifications of Withdrawing Money from a Retirement Account? Before the age of 59 1/2, withdrawing money early from a retirement account comes with a 10% tax penalty. The money may also bump you up into a higher tax bracket. I Started My Own Business. Can I Take Advantage of Home Office Deductions? Home office deductions are a little tricky. If you started a business and are looking into home office deductions, you’ll want to make sure everything you purchased …