Judging from the posts I am seeing recently on Facebook, the majority of people I know are aware that it’s tax time. It seems like there is quite mix of emotions surrounding this season. The responses I see range from “Yippee! I’ve been waiting for this return ALL YEAR LONG” to the well known….”Oh Crap. NOW what do I do?”
If you are panicked about tax season, it’s time to relax. Here are some of the most common questions people ask and the best answers I could find.
- Is unemployment income taxable? According to the IRS, Yes. Unemployment income along with severance and accumulated vacation/sick time all must be reported. To avoid a big tax surprise it’s best to estimate your tax for these sources of income and withhold that estimated amount.
- What if my income has gone down -does that change anything? Taxes are always calculated based on your income. While a decline in income is not a cause for celebration, the good news is that you MAY be eligible for tax credits that you were not eligible for before. Check here for more information on the Earned Income Tax Credit.
- I can’t pay my taxes due – now what? To avoid penalties and interest, you must pay the amount you owe on time. However, if you contact the IRS directly, they may be able to grant you an extension, installment agreement or another type of payment plan. Ignorance is not bliss in this case – proactively contacting the IRS is key to handling this situation without it costing you more.
- When does my unmarried, dependent child have to file their own tax return? Since guidelines can change from year to year, you should always check the IRS website to get the most up to date guidelines. You can find that information here.
- Can I still get a refund if I’m paying a prior year’s taxes with a repayment plan? The bad news is no, you can’t. The good news is that the amount you are due for the current year’s refund will be applied to the amount you still owe which can help you pay it off faster. You can read more about it here.
While these questions certainly don’t cover all the items you may be wondering about, they do represent some of the most common ones. The IRS website has a wealth of information related to any question you could think up with regard to your taxes. If you can afford professional tax help, it’s always easier to rely on the expertise of a professional to prepare your taxes to avoid any surprises.