What is an IRS free file?

by | Nov 26, 2020 | IRS, IRS e file Return

What is an IRS free file? 

The IRS Free File Program can be described as a public-private partnership that has been established between the IRS and tax preparation filing software industry entrepreneurs who are providing their brand name products free of cost.  By the IRS free file, taxpayers can prepare their tax returns and file their federal income tax returns online free of cost. 

  • By traditional IRS Free File, taxpayers can obtain free online tax preparations and federal tax filing options on the partner websites of the IRS. These partners are the online tax preparation companies that would help in developing and delivering the service of tax preparation and tax filing to the taxpayers.
  • The IRS Free File Fillable Forms are the electronic tax forms that can be filled online and without paying any charges as well. However, you must keep in mind the fact that the IRS Free File Option is only made available for those taxpayers who have an income i.e. Adjusted Gross Income (AGI) greater than $69,000. 

Overview of the IRS Free File. 

  • You can access the tax preparation software on the IRS website.
  • There is no compulsion to make use of any particular provider. The provider chosen by you must be working the best according to your situation.
  • On clicking on the provided link on the IRS website, you can visit the necessary provider. You can check the eligibility criteria and also find out the features offered by each provider.
  • Now, on the creation of an account, the software provider would show you a step-by-step walk through the process of completion of the tax returns preparation and filing.
  • The software would provide you with a set of questions find out tax breaks and provide the best options for tax filing based on the answers you have provided.
  • Every service provider can file the tax returns for you electronically and you would obtain an acknowledgment in the form of an e-mail receipt when the return filing request has been accepted by the IRS.
  • By the IRS Free File, the tax payment can be made free too. However, if you owe taxes to the IRS then the tax payment can be made by the IRS Direct Pay. 

Who can use the IRS Free File? 

  • IRS Free File can be said to be an ideal option for you if you have basic tax situations.
  • The IRS Free File system will provide the most common tax forms; so, if your tax return filing would need to file some obscure tax form then the IRS Free File is not a convenient option for you.
  • You must also be quite proficient in the English language to make an ease-free use of the IRS Free File.
  • Moreover, the processor of your computer and the browser should also be apt for the use of the software. The processor should be the Intel Core 2 Duo 1.8 GHz processor and you must have high internet speed. 

Requirements to start the IRS Free File. 

Some specific requirements must be fulfilled for starting the use of the IRS Free File. 

  1. Your AGI can be accessed by a copy of the previous year’s federal tax returns.
  2. Your valid Social Security Numbers, valid Social Security Numbers for your spouse, and other dependents.
  3.  Receipts of Social Security Benefits and Unemployment Compensation.
  4. Income receipts related to any small scale business if you have and income receipts from real estate, rental, partnerships, trusts, S corporations, etc.
  5. Form 1099-INT to show the interest that has been paid to you throughout the year.
  6. Form W-2s which shows your annual wages obtained from employers.
  7. Form 1099-G for highlighting any refund, credit of State and local taxes.
  8. Form 8962 reflecting the Premium Tax Credit. 

Rights and Protection of taxpayers. 

If you are opting for the IRS Free File method, you would have some of the below-mentioned rights. 

  1. Free Federal Tax Return
  2. Protection from any kind of unnecessary fees
  3. Guidance in making your choices
  4. Protection from the bank product fees
  5. Obtain important information on the charges related to State returns 

Conclusion. 

So, the IRS Free File is a convenient option for tax return filing and tax payment which can be used by the Americans for easy tax procedures.

 

 

IRS assists the elderly for tax counseling in the US.

by | Nov 24, 2020 | IRS, taxes, Taxpayers

IRS assists the elderly for tax counseling in the US.

The IRS (Internal Revenue Service) had very recently awarded more than $36 million for the Elderly and Volunteer Income Tax Assistance Grants for those organizations which help in providing senior citizens of the country with federal tax return preparation. Usually, taxes are difficult for everyone; tax returns, tax credit, property tax, social security tax, etc. make the entire concept of taxes even more confusing. With increasing age, the process of tax preparation and tax return seems to be even more difficult.

 The complex tax rules, changing technology and the lack of proper funds for hiring a professional tax preparer can make the tax preparation and file even much more difficult. So, if you are ageing and finding it difficult to prepare your federal taxes yourself then you can approach the IRS for assistance.

 The IRS offers two great tax preparation programs which the seniors in the country can use:- 

  1. Volunteer Income Tax Assistance (VITA) Program
  2. Tax Counseling for the Elderly (TCE) Program

 Throughout the US, VITA and TCE support centers and programs are located which would be helpful for the seniors. When you visit the IRS website, you would be able to search based on your location that would help you in finding the nearest VITA or TCE program. The IRS would partner with several organizations throughout the US for developing the VITA and TCE programs. These community partners can include faith-based organizations, community centers, non-profit agencies, large employers, etc.  Proper training on tax laws and certifications are provided by the IRS to these community partners for enabling them to prepare correct tax returns.

 Volunteer Income Tax Assistance (VITA) Program.

 The volunteers at VITA are the IRS certified professionals who help old people or disabled people in their tax preparation. The VITA program by the IRS is most suitable for those seniors who have a particular income which can be subject to income tax. Moreover, the VITA Program is also helpful for those seniors who do not have very fluent English skills, earn a higher income, and need professional assistance for tax preparation. The VITA Program was created in the year 1969 and would help the under-deserved communities like low –income and moderate-income individuals in tax preparation.

 The tax professionals at VITA work very hard and help in providing good quality services for the seniors who have low income and would need professional help for the preparation of their tax returns. VITA volunteers would also help in providing counseling on the tax credits that are applicable for reducing the income tax burden. But, there are certain limits on what the VITA volunteers can prepare and cannot prepare. The IRS would suggest that difficult federal tax situations must be handled by paid tax professionals.

 Tax Counseling for the Elderly (TCE) Program.

 Those senior citizens who are not very sure about which tax assistance program they must use can use the TCE Program. The TCE Program was started in 1978 and its volunteers receive proper tax training and technical assistance. According to the laws in 2017, a senior citizen must be 60 years old to qualify for using the TCE Program for tax assistance.  Many seniors in the US have a living which is based on a fixed income and they should use the TCE Program rather than the VITA Program. 

 TCE Program is operated by the IRS certified tax professionals and provides free services to the senior citizens. TCE volunteers make it more convenient for senior citizens by traveling to locations where the seniors can meet them easily such as libraries or community centers, etc.  Several non-profit organizations would administer the TCE Program that functions on the grants given by the IRS.

 Conclusion

So, senior citizens can avail themselves of professional tax aid programs and also be aware of the tax scams that are a common occurrence these days.

What to do if you have missed your Tax Extension deadline?

by | Nov 21, 2020 | Blog, Tax Extension

What to do if you have missed your Tax Extension deadline?

 Due to the poor economic conditions caused by the pandemic COVID-19, the US Government had extended the tax filing deadline for the Americans due on 15th April 2020 to 15th July 2020. However, millions of Americans have not been able to file their tax returns by the 15th of July 2020 and have filed for an extension. By this extension, the tax return filing deadline would be extended up to 15th October 2020 which has even passed now.

 So, if you have missed your extended tax return filing deadline then you might be wondering about certain factors.  Let us have a look at what are the common things to be considered if you have missed your extended tax filing deadline.

 Should you still file your tax returns if you have missed the extended deadline? 

Yes, even if you have missed your extended tax return filing deadline you must file your tax returns soon. You must fill your tax returns even if your income level was lower than the minimum income level set by the IRS i.e. $12,200 when you are filing your tax returns as a single individual and $24,400 in case if you are married and are filing your tax returns jointly for the year 2019. You must also file your tax returns even if you are eligible for availing credit like Earned Income Tax Credit. 

The sooner you are going to file your tax returns; the penalties you would pay for missing the extended tax deadline would be less.  

What would happen if you miss filing tax returns by the extended deadline? 

If you are going to obtain tax refunds from the IRS, then you would not be paying any penalty for missing your extended tax filing deadline. But, if you missed your extended tax deadline and have taxes due to pay to the IRS then you would have to pay penalties. Usually, this penalty is 5% of the tax that has not been paid and varies up to 25%. This penalty is calculated at the beginning of each month for which the tax has not been paid yet.

 Will a penalty be charged if you owe money to the IRS? 

If you owe money to the IRS, then there would be three types of penalties which you would have to pay. 

  • Failure-to-file penalty.

     This penalty would be charged if you are not able to file your tax returns on time. This failure to pay the penalty would be applicable for a full month or for a specific part of the month for which the return filing has been delayed. 

  • Failure-to-pay penalty.

    If you have not been able to pay your taxes to the IRS on time, then the IRS would impose a penalty. This penalty would be around 0.5% of the tax that is due to be paid to the IRS. 

  • Interest.Interest would be charged by the IRS if you are not able to file your tax returns on time or pay your taxes according to the due dates.

  • Will you still be paying penalties if miss the extended deadline due to financial hardships.

With the havoc created by the pandemic COVID-19, it is quite obvious for you to be facing economic hardships. However, if you can state the reasonable cause behind the inability to file tax returns or inability to pay your taxes your penalties might be relaxed.

  In case, you have been affected by the natural disaster which has been declared by the Federal Government then you would obtain relief while paying the taxes or filing the tax returns.

 So, even if you have missed your extended tax filing deadline you should not forget completely about filing tax returns.

Tax scam alert for NRIs in the US.

by | Nov 18, 2020 | NRI, NRI business

Tax scam alert for NRIs in the US.

Tax scams can lead to huge loss of money as well as personal information. The tax scammers usually make use of mails or telephones for creating scams that can involve individuals and businesses also. Tax scam alert for NRIs is a common occurrence in the US now. NRIs should always keep in mind that the IRS would not contact the taxpayers by mails, text messages, or through social media channels. IRS impersonators can also intimidate the common people by preparing fabricated bills for tax.

Tax scammers remain active throughout the year and the IRS urges the NRI taxpayers to be very careful about phishing emails and scams. The IRS would usually initiate contact with the taxpayers with the help of regular mail which can be delivered by the United States Postal Service. There would be special circumstances when the IRS would contact an individual or a business such as an overdue tax bill for the security of a delinquent tax return. Taxpayers would usually receive communication from the IRS in the form of notices or letters.

The IRS does not.

NRI taxpayers must keep in mind that the IRS would not do the following activities:-

  1. The IRS would never make calls to make NRI taxpayers for making immediate tax payments using a specific payment method which can be a prepaid debit card or a gift card. As a general rule, the IRS would mail the bills due to the taxpayers who have taxes due.
  2. The IRS would not demand the NRI taxpayers for payment of taxes without even raising any question on the tax amount which is due.
  3. NRI taxpayers must always keep in mind that the IRS would never threaten them about bringing in the police, immigration, or other law enforcement officers for not being able to pay the taxes on time. Moreover, NRI taxpayers should also remember that the IRS would not be able to revoke their driving license or immigration status. Any type of threat like this is a very common tax scam for Americans and they must be aware of these occurrences.

 What the IRS does?

 The IRS would resort to the below-mentioned methods to obtain the tax payments if any due for the NRI taxpayers. 

  • Collection.

     The employees of IRS might come to your home or your workplace without any prior announcement for the collection of the tax due. However, the IRS employees will not make a demand for immediate payment of the taxes to any source other than the U.S. Treasury. The IRS would also assign private debt collectors for some of the taxpayers. The Private Collection Agencies would never ask the NRI taxpayers for payment through a gift card or a prepaid debit card. 

  • Conduct audits.

 The IRS can conduct audits and would also call NRI taxpayers for setting up appointments. The IRS can also call the taxpayers to discuss items related to the taxes. However, this would happen only when the IRS has attempted to provide notification to the taxpayers through mails. After the mailing, the IRS auditor would call the taxpayers for setting up discussion calls. 

  • Criminal investigations. 

Criminal investigations can be carried out by the IRS for tax purposes and this can lead to investigators visiting the taxpayer’s house or business. But, these investigators are agents for law enforcement and would not be asking for any payment from the taxpayers.

 Whom to contact?

If an NRI taxpayer suspects a tax scam or feels that he is being harassed by some impersonator, then he must take the below-mentioned actions.

  1. The taxpayer can contact the Treasury Inspector General for Tax Administration to report about the tax scam.
  2. The NRI taxpayers can report the tax scams to the Federal Trade Commission. The taxpayer can use the FTC Complaint Assistant on the FTC.gov website.
  3. Any email which claims to be from the IRS or claims to contain IRS related components can be reported to the Electronic Federal Tax Payment System.

Conclusion.

So, with the number of tax scams and frauds increasing very speedily taxpayers must remain alert and inform about anything suspicious to the IRS.

 

 

Moving from Employee to Self-Employed? Here’s what it means to your taxes.

by | Nov 12, 2020 | Employee management, self employment tax

Moving from Employee to Self-Employed?

Here’s what it means to your taxes.

If you had some hobbies or areas of interest and that has turned into your side business now, then it would be an advantage for you. You would be able to make some additional income; however, you would have to think about the taxes related to the additional income earned.

You must be very well aware of your federal income taxes but you have new areas to address once you are self-employed. According to the IRS rules, you would have to report to the IRS about the expenses and the income earned from your business or self-employment. This needs to be done while filing your federal income tax returns. This process of reporting the income and expenses associated with self-employment is not very critical and can be done easily once you are aware of the steps.

Quarterly Estimated Tax Payments.

While you are an employee, your employer would be deducting withholding taxes from your salary every year. But, when you are self-employed you would have to make estimated tax payments every quarter. The general rule is that you would be expected to make a quarterly estimated tax payment if you are liable to pay $1000 or more as your annual federal tax. In case, you have a new business then an estimate of your net profit must be estimated to calculate your quarterly estimated tax. You can make use of various tools and online applications to calculate the estimated tax payments. Some of the applications can automatically calculate the estimated tax payments that need to be paid off.

The schedule for the payment of the Quarterly Estimated Tax Payments is:-

  1. 15th April
  2. 15th June
  3. 15th September
  4. 15th January of the next year

However, this year due to the COVID-19 related situations the schedule for the payment of the first and second estimated tax payment had been extended until 15th July 2020. If the 15th of the above-mentioned schedule falls on a weekend or it is a holiday, then the estimated tax payment would be made on the upcoming weekday.

Filing of the quarterly estimated tax payments or can be done by the e-filing method. Payment of your quarterly estimated tax can be done by the EFTPS (Electronic Federal Tax Payment System).

In case, you have been an employee and also owned a business during the year then you can have more amount taken from your salary so that there would be an offset in the estimated tax payment. Moreover, you must keep in mind that there are some tax credits available according to the provisions of the CARES Act. These credits have been introduced as a measure for providing relief from the adverse economic impacts caused by the pandemic COVID-19. These credits can be taken into consideration for reducing your fourth estimated tax payment.

Self-Employment Tax Calculation.

The self-employment taxes are paid by self-employed individuals for Social Security and Medical care. When you were working for an employer, you were paying FICA tax that was 7.65% of your gross income. Your employer would pay a matching percentage i.e. a total of 15.3%. But, in self-employment, you would have to pay a total of 15.3% as the self-employment tax. IRS would allow you to deduct half of your tax levied on self-employment against the income generated for federal income tax.

Income Tracking and Expenses.

For estimating your self-employment tax, you must track your income and expenses thoroughly.

Your retirement plan.

When you are self-employed, you would not have a retirement plan offered by the employer. So, you would have to save a considerable amount for your retirement.

  1. Individual Retirement Account (IRA) – The simplest method of setting up a retirement plan if you are a self-employed individual and have a new business.
  2. SEP IRA – You can contribute 25% of your net income earned from your business up to a maximum amount of $57,000.
  3. 401(K) plan – This retirement plan is meant for an individual and can also include your spouse.

Your health insurance.

If you are a self-employed individual, you would have the below-mentioned options for health insurance coverage.

  1. Your previous employer’s plan will give you coverage for 18 months.
  2. If your spouse has a medical insurance plan offered by his employer, then you can obtain coverage under that plan.
  3. Purchase a health insurance plan from the health insurance marketplace.

 Conclusion.

 So, self-employment can help you in bringing additional considerations related to taxes. You can also make some planning for your retirement and provide coverage for health insurance.