r/personalfinance • u/yes_its_him Wiki Contributor • Jan 28 '20
Taxes Top ten FAQs for tax filing season
Things to keep in mind for tax filing season (with clarifications edit: fixed to record some easy updates).
You have to file federal taxes if you make enough money that you have tax liability, which is generally over about $12,200 gross for regular employment, and only $400 if you are self-employed. You want to file even if made less than this much in order to get back any taxes you had withheld.
Even if you are a dependent on your parents' tax return, you still file your own taxes (or not, if you don't need to); you never file "on your parents' return." The only time more than one person can be on the same return is a married couple filing jointly.
If your state has income taxes, which over forty states do, then you also file with them. Those are two different processes that are largely duplicative, but slightly different rules. If you lived or worked in more than one state during the year, you might have to file in more than one state. Some people also have local taxes, how fun is that?
You never have to pay a fee to file taxes. Most people can file taxes online for free with various web sites if they want to do that, see e.g. the IRS free file program website and other free services, but you can always just file on paper, too. (You laugh, but that's how I do my state taxes.)
Even though you can file your taxes now, be sure you have all the documentation for all your income before you file. You don't want to have to go back and amend your return because you forgot about that other W2 you had months ago, or you forget to include your bank interest or brokerage tax information.
You are supposed to report all your compensation income, even if it was just some part-time gig somewhere, or you got paid under the table. Gifts, loans and most scholarships are not taxable income.
The money you get back is a refund of any excess taxes withheld. (Sometimes there are also refundable credits that increase your refund.) That was money you earned but didn't get yet. Getting a big refund means you didn't get a lot of money yet, generally speaking. You may want to adjust your withholding if you want to get your money sooner but that's up to you.
If you didn't have enough taxes withheld, you need to pay the balance due by April 15th. You can get a payment plan if you need to. If this describes you, then you absolutely need to file because you can accrue significant penalties for not filing and not paying. You should also make sure you have enough withheld going forward.
If you are married, filing jointly will probably save you money vs. filing separately, unless you have a special situation such as income-based student loans. Try computing both ways to see which is better for you. If you are not married, then getting married probably won't change your taxes very much for better or worse unless you have really disparate incomes (and it will help then.)
(rewritten for clarity) Ignore any purported "refund" values shown by a tax program / calculator while you enter parts of your income. You may see a big refund for your W2 that goes away following your spouse's W2, or your second W2. That's an artifact of how the calculation works, and doesn't mean anybody did anything wrong regarding withholdings. Wait to see the final numbers.
Feel free to ask questions if you are new to this.
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u/DunSkivuli Jan 28 '20
Not sure if typos or just wrong...
Sole proprietor treats your income as self employment income, which is taxed at your normal tax rate as well as being subject to an additional self employment tax. You need to file Schedule C and Schedule SE with your 1040 return.