Can The IRS Take Your 401K
Regular Post
Written by Craig B

Preparing For Tax Season

Preparing for tax season can be a smooth process if you organize your financial records and understand the necessary steps. Here’s a guide to help you get ready:

1. Organize Your Financial Documents

Start by gathering all the paperwork you’ll need to file your taxes:

  • Income Records:
    • W-2s (for employees).
    • 1099 forms (for freelancers, contractors, or investment income).
    • Bank or brokerage statements for interest, dividends, and capital gains.
  • Expense Records:
    • Receipts for deductible expenses (e.g., medical bills, education, or charitable donations).
    • Business expenses if you’re self-employed.
  • Other Forms:
    • 1098 forms for mortgage interest or student loan interest.
    • Statements for contributions to retirement accounts (e.g., IRA).
  • Last Year’s Tax Return:
    • Helps ensure you don’t miss any deductions or credits.

2. Know Key Dates

Mark these critical tax deadlines:

  • Filing Deadline: Typically April 15 (or the next business day if it falls on a weekend/holiday).
  • Quarterly Estimated Payments (if applicable): January 15, April 15, June 15, and September 15.
  • Extensions: File Form 4868 by the tax filing deadline to get an extension until October.

3. Understand Recent Tax Law Changes

Stay informed about any changes in tax laws that may affect:

  • Standard deduction amounts.
  • Child tax credit or dependent care credits.
  • Limits on deductions or contributions to retirement accounts.
  • New benefits for small businesses or pandemic-related tax provisions.

4. Choose the Right Filing Method

  • DIY Filing: Use trusted tax software like TurboTax, H&R Block, or Cash App Taxes if your tax situation is straightforward.
  • Hire a Professional: Consult a certified public accountant (CPA) or enrolled agent for complex returns (e.g., owning a business, significant investments, or international income).

5. Check for Deductions and Credits

Identify deductions and credits you may qualify for:

  • Common Deductions:
    • Mortgage interest, state/local taxes, student loan interest.
    • Business expenses if self-employed.
  • Popular Credits:
    • Earned Income Tax Credit (EITC), Child Tax Credit, or Education Credits.

6. Review Your Withholding and Payments

  • If you’ve overpaid taxes through paycheck withholdings, you might get a refund.
  • If you underpaid, you may need to make an additional payment or adjust your withholding for the next year using Form W-4.

7. Contribute to Tax-Advantaged Accounts

Maximize contributions to accounts with tax benefits by the deadline:

  • Traditional IRA/401(k): Contributions may lower taxable income.
  • Health Savings Account (HSA): Tax-deductible contributions and tax-free withdrawals for medical expenses.

8. Plan for Refunds or Payments

  • Refunds:
    • Decide how to receive your refund (e.g., direct deposit or check).
  • Owed Taxes:
    • Prepare to pay any owed taxes by the filing deadline to avoid penalties.

9. Protect Yourself from Fraud

  • Beware of tax scams and phishing attempts.
  • Use the IRS website for official information and secure filing.
  • Shred sensitive documents you no longer need.

10. File Early

  • Avoid last-minute stress by filing as soon as you have all required documents.
  • Early filing reduces the risk of identity theft (where someone uses your SSN to file a fraudulent return).

Checklist for Tax Season Preparation

  • Gather all tax documents (W-2s, 1099s, receipts, etc.).
  • Review last year’s tax return for reference.
  • Update personal and contact information with your employer or bank.
  • Choose your filing method (self or professional).
  • Identify eligible deductions and credits.
  • Review recent tax law changes.
  • File before the deadline to avoid penalties.

 

 

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Why Was My Tax Return Rejected
Regular Post
Written by webtechs

If My Tax Return Was Rejected Can I Start Over?

Depending on how you file, the IRS will usually notify you of a rejected tax return via email or standard mail. In the rejection notice, you will find a rejection code and an explanation of why the rejection occurred.

However, you should always be wary of scammers that try to steal your information posing as the IRS. The IRS will typically not call you about a rejection unless they have repeatedly tried contacting you by other means first.

Thankfully, when the IRS rejects your tax return, it’s usually nothing to be overly concerned about. Let’s take a look at a few reasons why your tax return was rejected and how you can start the process over.

Why Was My Tax Return Rejected?

The IRS will reject a tax return for a variety of reasons, including the following:

The Return Was Already Accepted

The IRS will reject your tax return if they previously accepted a return with your Social Security number (SSN) or taxpayer identification number (TIN). If this occurs, if could be a sign of identity theft or fraud.

Missing Or Incorrect Information

The IRS can also reject your return if a name or number fails to match what they have on file for you. For instance, if you changed your name after marriage or need to update your name with the Social Security office, the IRS needs to know about this. A simple issue like a typo when e-filing your return could end up in a rejection.

Your Signature Does Not Match

When you e-file, the IRS will ask you to provide your adjusted gross income (AGI) from the previous tax year or an Identity Protection PIN to ultimately verify your identity. If the numbers you provide do not match the IRS’ records, your return will likely be rejected.

You Claimed A Dependent Claim On Another Return

If you try to claim a dependent, such as a child, already claimed on another tax return, the return will be rejected. An example of this could be a divorced parent trying to claim their child when their ex-spouse has already claimed the child on their return. The same thing can happen if a dependent files their own return and claims themselves.

What To Do If A Tax Return Is Rejected

If your return has been rejected, you will need to correct any errors and resubmit the return as soon as you can. You may be able to e-file the return for small mistakes like a typo, or the IRS could instruct you to mail in a paper return for more serious errors.

Once you know exactly what caused the return to be rejected, you are required to correct the mistake and resubmit the original return.

Correcting An E-File Rejection

Whenever an e-filed return is rejected, the IRS generally sends a rejection code that includes an explanation of why it was ultimately rejected. This will usually happen within a few hours of submitting the return.

You may be able to resubmit through e-file or filing a paper return depending on the reason why the return was not accepted. If, for example, you made a mistake in entering the EIN or SSN or other errors, you can make corrections and e-file the return once again. Ensure that you submit before the filing deadline or within five days of getting the rejection notice if this occurs after the deadline passed.

Refiling By Paper Return

When the return is rejected because of possible identity theft or tax fraud, the IRS requires individuals to resubmit the return by mail. You also need to refile by mail if your dependent was claimed on another individual’s tax return.

You will need to include all required tax forms, W-2s and/or 1099s, as well as any additional supporting documentation. The IRS Form 14039, Identity Theft Affidavit should also be included.

Once the IRS has received your return and Form 14039, you will get an acknowledgement letter. The IRS will then investigate the returns in questioned and make a decision on which one is valid. Sometimes, this entire process can take up to six months to complete.

How Long Do I Have To File A Corrected Return?

You will need to correct any mistakes prior to the year’s tax deadline. If the IRS rejects your return on or after Tax Day, you will have five days to correct and resubmit the return.

Some states will have different grace periods for rejected returns, so always check to see how much time you have to resubmit your return.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Why Was My Tax Return Rejected
Regular Post
Written by webtechs

Why Was My Tax Return Rejected?

Thankfully, when the IRS rejects your tax return, it’s usually nothing to be overly concerned about. Let’s take a look at a few reasons why your tax return was rejected and what you can do moving forward.

What Is An IRS Rejected Tax Return?

If you receive a notice from the IRS that your federal income tax return was rejected, it means they noticed and error. The IRS is sending the return back to you for correction.

Why Did The IRS Reject My Tax Return?

The IRS will reject a tax return for a variety of reasons, including the following:

The Return Was Already Accepted

The IRS will reject your tax return if they previously accepted a return with your Social Security number (SSN) or taxpayer identification number (TIN). If this occurs, if could be a sign of identity theft or fraud.

Missing Or Incorrect Information

The IRS can also reject your return if a name or number fails to match what they have on file for you. For instance, if you changed your name after marriage or need to update your name with the Social Security office, the IRS needs to know about this. A simple issue like a typo when e-filing your return could end up in a rejection.

Your Signature Does Not Match

When you e-file, the IRS will ask you to provide your adjusted gross income (AGI) from the previous tax year or an Identity Protection PIN to ultimately verify your identity. If the numbers you provide do not match the IRS’ records, your return will likely be rejected.

You Claimed A Dependent Claim On Another Return

If you try to claim a dependent, such as a child, already claimed on another tax return, the return will be rejected. An example of this could be a divorced parent trying to claim their child when their ex-spouse has already claimed the child on their return. The same thing can happen if a dependent files their own return and claims themselves.

How Will I Be Notified If My Return Has Been Rejected?

Depending on how you file, the IRS will usually notify you of a rejected tax return via email or standard mail. In the rejection notice, you will find a rejection code and an explanation of why the rejection occurred.

However, you should always be wary of scammers that try to steal your information posing as the IRS. The IRS will typically not call you about a rejection unless they have repeatedly tried contacting you by other means first.

What To Do If A Tax Return Is Rejected

If your return has been rejected, you will need to correct any errors and resubmit the return as soon as you can. You may be able to e-file the return for small mistakes like a typo, or the IRS could instruct you to mail in a paper return for more serious errors.

How To Fix A Rejected IRS Tax Return

Once you know exactly what caused the return to be rejected, you are required to correct the mistake and resubmit the original return.

How Long Do I Have To File A Corrected Return?

You will need to correct any mistakes prior to the year’s tax deadline. If the IRS rejects your return on or after Tax Day, you will have five days to correct and resubmit the return.

Some states will have different grace periods for rejected returns, so always check to see how much time you have to resubmit your return.

What To Do If A Return Was Rejected Due To Identity Theft

It’s recommended to act as soon as possible if you believe you are a victim of identity theft. Respond promptly to any IRS correspondence by calling them with the number provided. You should also print and mail in Form 14039 with your submitted return.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Can The IRS Take Your 401K
Regular Post
Written by Craig B

Can The IRS Take Roth IRA

The IRS generally cannot directly take or seize your Roth IRA, but there are situations where your Roth IRA could be affected if you owe taxes to the IRS. Here’s how it works:

1. IRS Tax Levy:

  • Levies on Financial Assets: The IRS has the power to levy (seize) financial assets, including bank accounts, brokerage accounts, and retirement accounts, to satisfy unpaid tax debts. This includes Roth IRAs.
  • Process: Before levying your assets, the IRS will typically send several notices demanding payment and providing you with opportunities to resolve the debt. If you do not take action, the IRS may issue a levy and seize funds from your Roth IRA.
  • Exemptions: Certain assets may be exempt from IRS levies, but retirement accounts like Roth IRAs are not automatically exempt.

2. Impact of Early Withdrawal:

  • Taxes and Penalties: If the IRS levies your Roth IRA, the amount withdrawn to satisfy the tax debt may be subject to income taxes and, if you are under age 59½, a 10% early withdrawal penalty on the earnings portion of the withdrawal.
  • Order of Withdrawal: Roth IRA withdrawals are generally considered to come first from contributions (which can be withdrawn tax- and penalty-free), then from earnings. The IRS would apply the levy to your account, which could trigger taxes and penalties depending on the amount and source of the funds withdrawn.

3. Avoiding IRS Levies:

  • Payment Plans: If you owe taxes and are concerned about a levy, you can contact the IRS to arrange a payment plan or offer in compromise, which may allow you to pay your tax debt over time or settle for less than the full amount owed.
  • Communication: Promptly addressing IRS notices and seeking professional advice can help you avoid more severe collection actions, such as a levy on your Roth IRA.

4. Bankruptcy Protection:

  • Protection in Bankruptcy: Under certain circumstances, Roth IRAs may be protected from creditors, including the IRS, during bankruptcy proceedings, subject to specific limits and rules under federal bankruptcy law.

5. State Laws:

  • State Protections: Some states offer additional protections for retirement accounts against creditors, including the IRS. These protections vary by state and may limit the IRS’s ability to levy your Roth IRA.

In summary, while the IRS can levy your Roth IRA if you owe back taxes, this typically occurs after multiple notices and opportunities to resolve the debt have been provided. To avoid this, it’s important to address any tax issues promptly and seek professional advice if you are unable to pay your tax debt.

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If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation. This family owned tax practice has been serving the public since all the way back in 1977!

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Can You Add Money To A Certificate Of Deposit Regularly
Regular Post
Written by webtechs

How To Open A CD

A CD account is a savings instrument issued and administered by banks, brokers, and credit unions. It is widely considered one of the safest investments you can make. A CD will pay a little more interest in return for committing to keep your money in the bank for a specific amount of time. Use this step-by-step guide to open a CD account.

How To Open A CD Account

These accounts are much safer than stocks, but they will not offer high returns. CDs are insured by the FDIC if they are ultimately issued by an FDIC-insured bank.

Typically, CD’s do not allow individuals to add to their balance. Once you make the initial deposit, the balance will be locked in to keep earning interest until the maturity date. This is part of the reason that CDs do usually offer higher interest rates than other deposit account types.

When you invest in a CD, you commit to locking your money away for a specified period of time. You cannot add to the balance and there will often be steep penalties to pay when choosing to withdraw your money early. You will get a greater return on your deposit in exchange for less liquidity.

Follow the steps below to open your account.

Step 1. Choose The Right CD Account

A good first move is to compare CD interest rates across several banks and credit unions before opening an account. It’s important to also keep the following factors in mind:

  • CD terms can range all the way from three months to five years.
  • CD types can vary, but regular CDs are undoubtedly the most common. Add-on CDs will differ from traditional CDs since they allow the depositor to contribute more funds to the account during its term.
  • You can open single or joint accounts. Check with your local bank for more information on what they provide.
  • With a CD laddering strategy, you can purchase multiple CDs, each featuring a different term.

Step 2. Apply

Depending on the bank, it may be possible to open the CD account online. Of course, you can always open this account in-person at the branch or over the phone. If you do so online, the application process will typically take 5-20 minutes to complete.

If you miss any required information or are not yet an existing customer, you may need help completing this step.

Step 3. Have The Proper Documentation Ready

When opening a CD, you will be expected to provide one to two forms of ID, plus your residential address. Other contact information like a phone number and email address should be provided at this time.

Step 4. Choose How You Want The Interest Disbursed

Most financial institutions will offer you two options: Receive all the interest following the end of the CD term or disburse the interest as regular payments. Collecting all the interest at the end of the term is more common. However, you can set this up as regular payments, such as monthly or annually.

Step 5. Make Your Deposit

Unlike with a savings account, you typically aren’t able to add money to the CD more than one time. You’ll put down a set amount and leave it untouched until the term of CD has concluded. You can link this account to another bank and transfer the money by mailing or depositing a check when opening the account.

Tax Settlement in Mesa, Arizona

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CD Vs IRA
Regular Post
Written by webtechs

CD Vs IRA

Let’s take a look at the differences between a Certificate of Deposit (CD) and an Individual Retirement Account (IRA).

Individual Retirement Account (IRA) Vs. Certificate Of Deposit (CD)

An IRA and a CD are two savings account types that can be obtained at financial institutions, such as banks. While both accounts are designed to help individuals save money, they are inherently different overall. A CD is considered a short-term savings account, while an IRA is best for long-term retirement investing.

IRAs have tax advantages to the saver and restrictions on how it can be used before retirement age is reached. The account holder can contribute to this account every year, up to the limits set by the IRS. Essentially, a CD is equivalent to a savings account. The account holder will get a little more interest in return for keeping the money in this account for a set amount of time, typically from six months to five years.

Anyone with an IRA account can choose to invest the money in any of a large variety of stocks, mutual funds, bonds, and exchange-traded funds (ETFs). Account holders can even choose to invest some of it in CDs.

CD Details

A CD is a savings instrument issued and administered by banks, brokers, and credit unions. It is widely considered one of the safest investments you can make. A CD will pay a little more interest in return for committing to keep your money in the bank for a specific amount of time.

These accounts are much safer than stocks, but they will not offer high returns. CDs are insured by the FDIC if they are ultimately issued by an FDIC-insured bank.

Typically, CD’s do not allow individuals to add to their balance. Once you make the initial deposit, the balance will be locked in to keep earning interest until the maturity date. This is part of the reason that CDs do usually offer higher interest rates than other deposit account types.

When you invest in a CD, you commit to locking your money away for a specified period of time. You cannot add to the balance and there will often be steep penalties to pay when choosing to withdraw your money early. You will get a greater return on your deposit in exchange for less liquidity.

IRA Details

The IRA was developed by the federal government to encourage Americans to save money towards their retirement. The account holder can make annual contributions for decades as the balance increases. The IRS does set eligibility requirements, limits on how and when you are allowed to make contributions.

You should consider opening a traditional or Roth IRA alongside your 401(k). A Roth IRA is funded with your after-tax dollars, while the traditional version is funded via pre-tax income. Both of these IRAs allow you to withdraw money without penalty after the age of 59.

If you have any extra money left in your budget at the end of the month, funding IRAs can put you on a fast track to a comfortable retirement. The more time your funds have to grow, the larger they will be come time for retirement.

CD Vs IRA Differences

Let’s take a look at the main differences between these two savings accounts to determine which type is best for your situation.

Account Types

Investors will have many different CD and IRA options to choose from. There are typically four different IRAs that one can invest in, including the following:

  • Traditional IRA: This allows investors to make tax-deductible contributions.
  • Roth IRA: These accounts give investors tax-free income.
  • SEP IRA: Employers can make contributions to a traditional IRA for employees.
  • SIMPLE IRA: Small business employers and employees will have the opportunity to make matching contributions as long as they have no other active retirement savings plan.

Here are a few things you can do with a CD:

  • Add-On CD: Add-on CDs will differ from traditional CDs since they allow the depositor to contribute more funds to the account during its term.
  • CD Laddering Strategy: With a CD laddering strategy, you will purchase multiple CDs, each featuring a different term.

Financial Liquidity

Every financial vehicle will have its own set of objectives and goals. Each type of financial instrument is designed for a specific purpose and therefore comes with its own constraints. Usually, CDs cannot be withdrawn once the account is created. Account holders must wait until the CD term is finished before they get access to their money.

IRAs have an entirely different set up. IRA contributors are allowed to withdraw Roth IRA contributions at any time. However, any earnings cannot be withdrawn until the saver is over 59 years old.

Tax Implications

A big difference between the accounts is how they are treated for tax purposes. IRAs provide a few certain tax breaks to investors. Contributions made to a traditional IRA are tax-deductible, as long as you meet the income and tax-filing status requirements.

CDs, however, do not come with any tax breaks. Your financial institution will send you a Form 1099-INT for any interest earned on your investment. The IRS requires that you report any interest income that comes in over $10.

Conclusion

It’s no secret that an IRA is a better financial vehicle for retirement savings. It will allow savers to have their earnings grow tax-free when utilizing a Roth IRA. If you are not saving for retirement, then a CD is a terrific and safe option.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Stimulus Checks In 2022
Regular Post
Written by Craig B

Student Loans and Federal Taxes 2024

Student loans can have various implications for federal taxes, including potential deductions, credits, and consequences for repayment. Here are some key points to consider regarding student loans and federal taxes:

  1. Student Loan Interest Deduction: Taxpayers who have paid interest on qualified student loans may be eligible to deduct up to $2,500 of the interest paid on their federal income tax return. This deduction is available even if the taxpayer does not itemize deductions, making it accessible to many taxpayers. However, there are income limitations and other eligibility criteria that must be met to claim this deduction.
  2. Education Tax Credits: Taxpayers who are paying for higher education expenses, including student loan interest, may be eligible for education tax credits such as the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). These credits can help reduce the amount of tax owed or result in a refund if the credits exceed the taxpayer’s tax liability.
  3. Income-Driven Repayment Plans: Borrowers who are enrolled in income-driven repayment plans (IDRs) for their federal student loans may have a portion of their outstanding loan balance forgiven after making qualifying payments for a certain period. However, the forgiven amount may be considered taxable income in the year it is discharged, potentially resulting in a higher tax liability for the borrower.
  4. Taxability of Loan Discharges: In certain circumstances, such as total and permanent disability or death, federal student loans may be discharged, meaning the borrower is no longer required to repay the remaining balance. However, the discharged amount may be considered taxable income unless an exception applies.
  5. Employer Student Loan Repayment Assistance: Some employers offer student loan repayment assistance as a benefit to employees. Under current law, employer contributions to employee student loans of up to $5,250 per year may be excluded from the employee’s taxable income, providing potential tax savings.
  6. Tax Withholding Adjustments: Borrowers who expect to have a significant tax liability due to forgiven student loan debt or other factors may need to adjust their tax withholding or make estimated tax payments to avoid underpayment penalties.

It’s important for borrowers to understand the tax implications of their student loans and to consult with a tax professional or financial advisor for personalized advice based on their individual circumstances. Additionally, tax laws and regulations may change over time, so borrowers should stay informed about any updates that may affect their tax situation.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Stimulus Checks In 2022
Regular Post
Written by Craig B

Student Loans and Federal Taxes 2023

Student loans can have several implications for federal taxes in the United States. Here’s how they work with federal taxes:

  1. Student Loan Interest Deduction: One of the primary ways student loans affect federal taxes is through the student loan interest deduction. Borrowers who are repaying qualified student loans may be eligible to deduct the interest they’ve paid on those loans during the tax year. As of my last knowledge update in 2022, this deduction allows eligible taxpayers to reduce their taxable income by up to $2,500 per year, subject to income limitations. The loan must have been used for qualified education expenses, and there are income phase-out limits.
  2. Taxable Forgiveness: In some cases, if you have federal student loans that are forgiven through income-driven repayment plans or Public Service Loan Forgiveness (PSLF), the forgiven amount may be considered taxable income. This means you could owe taxes on the amount forgiven. However, certain forgiveness programs, like PSLF, offer tax-free forgiveness after 120 qualifying payments.
  3. Income-Driven Repayment Plans: Under income-driven repayment plans (e.g., Income-Based Repayment, Pay As You Earn, Revised Pay As You Earn), your monthly loan payments are calculated based on your income and family size. These plans can help make your payments more manageable, but they can also affect your tax liability. If your monthly payments are reduced, you may have a higher taxable income because your discretionary income is lower. This could result in a larger tax bill in some cases.
  4. Tax Credits for Education Expenses: While not directly related to student loans, there are federal tax credits available, such as the American Opportunity Credit and the Lifetime Learning Credit, that can provide tax benefits for qualified education expenses. You can’t double-dip by claiming these credits for the same expenses that you used to deduct student loan interest.
  5. State Tax Implications: In addition to federal taxes, it’s important to consider how student loans may impact your state income tax liability. State tax laws vary, and some states offer their deductions or credits for student loan interest.

It’s important to keep accurate records of your student loan payments, interest paid, and any relevant documents related to your loans. When it comes to tax matters related to student loans, it’s advisable to consult with a qualified tax professional or use tax software to ensure that you take advantage of available deductions and credits and understand the potential tax consequences of loan forgiveness. Additionally, it’s essential to stay informed about changes in tax laws and regulations that may affect student loans and tax liability.

Are you able file your taxes or comprehend what you owe Uncle Sam? There is a strong chance you’re confused about tax regulations. On the bright side, we’ve compiled a list of answers to 5 common tax questions you may be asking — including if you should hire a tax preparer, if you should file if you’re a college student, when you’ll receive your tax refund and more.

  1. Should I hire a tax preparer?

If you choose to hire a tax professional is subject to your comfort level with the tax-filing procedure and the convolution of your return. If you’re seeking a tax preparer with a greater degree of experience, consider a CPA or E.A. Both professionals are required pass specific exams to get licensed.

  1. What is the standard deduction?

The standard deduction is an allocated amount of money of which you aren’t taxed. The total of the standard deduction that you claim is subject on your tax status and the year that you’re filing. Taxes filed in 2019, the standard deduction $12,000 for filing single and $24,000 for married couples filing together.

  1. When will my tax refund get to me?

When your tax refund will get to you is subject on how and when you filed. According to the IRS 90% of federal tax refunds are distributed within twenty-one days, and details are usually available within a day from when the IRS receives an e-filed tax return or 4 weeks following them receiving a traditional paper return. Utilize the IRS Where’s My Refund? device and the IRS2Go app to track it.

  1. Should I file taxes if I’m enrolled in college?

Prior to you filing taxes as a student going to college, think about your income and if your parents will claim you as a dependent on their taxes. Students that earn less than $12,000 don’t need to file a tax return but might still gain from filing if taxes were withheld from their paycheck or want to claim specific tax benefits like the American opportunity tax credit.

  1. How can I get the largest tax refund this year?

To receive the largest tax refund this year, begin to think about your tax circumstances early, preferably prior to the tax year ending. Next, consider how to make the most out of deductions through itemizing if you’re able to, declare tax credits and deductions in which you qualify for and give to your retirement accounts. When your tax situation is convoluted, think about working with an experience tax preparer.

  1. How do I select the preferable tax-filing software?

When evaluating the preferable tax-filing software for your circumstance, think about the costs and services offered. A great place to begin is with the dozen software businesses that work alongside the IRS-affiliated Free File Alliance. They are IRS approved and satisfy specific security and privacy conditions.

  1. Who is established as a dependent on my taxes?

Dependents may include qualifying children, family members and other people that you support. Dependents need to satisfy certain age, income and housing conditions.

  1. How can I evade IRS tax scams?

Evade typical IRS tax scams by handling suspicious or out of left field communications from alleged IRS officials with a healthy suspicion. The IRS will usually reach out by regular mail first, so be cautious of e-mails, any texts or phone calls insisting to be from the IRS. Additionally, be vigilant for poor grammar, threats of calling the police and demands for payments through gift cards or wire transfers.

  1. Should I choose direct deposit?

Yes, when you want to get your tax refund as fast as possible, choosing direct deposit can be faster than, for instance, petitioning a check to be mailed out.

  1. Can I decrease my chances of getting audited?

To decrease the chance of a tax audit, make sure there are no errors, disclose all of your income, retain correct records and stay away from illegal or inappropriate tax moves like exaggerating charitable donations.

Whereas these answers to common tax questions may help you begin in fulfilling your tax responsibilities, you might still have questions as you start to file your return. If you see any questions you do not see on this list, contact us and we will be more than happy to answer them.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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Can The IRS Take Your 401K
Regular Post
Written by Craig B

Can The IRS Take Your 401K

The IRS (Internal Revenue Service) generally cannot directly seize your 401(k) account to satisfy tax debts or other liabilities. 401(k) accounts are protected by various laws, including the Employee Retirement Income Security Act (ERISA), which provides safeguards for retirement savings.

However, there are some situations where the IRS may indirectly access funds from your 401(k):

  1. Early Withdrawals: If you make early withdrawals from your 401(k) account before reaching the age of 59½, you may be subject to income tax on the withdrawal amount, as well as a 10% early withdrawal penalty. These taxes can reduce the funds available to you.

  2. Required Minimum Distributions (RMDs): Once you reach the age of 72 (or 70½ if you reached that age before January 1, 2020), you are required to start taking minimum distributions from your traditional 401(k) account. These distributions are subject to income tax.

  3. IRS Levy: While the IRS cannot directly seize your 401(k), if you have a tax debt that you are not paying and the IRS issues a levy against you, they can potentially levy other assets, such as your bank accounts. If you decide to withdraw money from your 401(k) to cover the tax debt, it may still be subject to taxes and penalties.

  4. Divorce or Court Orders: In the case of divorce or other court-ordered settlements, a portion of your 401(k) may be subject to division between you and your former spouse or another party, as determined by a court.

  5. Bankruptcy: In the event of bankruptcy, your 401(k) is generally protected from creditors. However, this protection may vary depending on your state’s bankruptcy laws, so it’s essential to consult with a bankruptcy attorney for guidance specific to your situation.

Here are some things you can do to avoid having your 401(k) levied by the IRS:

  • File your taxes on time and pay your taxes in full.
  • If you cannot pay your taxes in full, contact the IRS to set up a payment plan.
  • Keep your 401(k) balance low. The less money you have in your 401(k), the less the IRS can take if they levy it.
  • Consider rolling over your 401(k) to an IRA. IRAs are not protected from levies by the IRS, but they may be less attractive to the IRS than 401(k)s because they are more difficult to access.

If you have any questions about whether or not the IRS can take your 401(k), you should speak to a tax advisor.

It’s crucial to consider the tax implications and penalties associated with early withdrawals from a 401(k) before taking any action. Generally, it’s advisable to preserve your retirement savings for its intended purpose—retirement. If you are facing financial difficulties and have a tax debt, it’s a good idea to contact the IRS to explore options for resolving the debt through installment agreements or other means that do not require depleting your retirement savings. Additionally, seeking advice from a tax professional or financial advisor can help you make informed decisions regarding your financial situation and retirement accounts.

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How Much To Contribute To 401(k) In Your 20s
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How Much To Contribute To 401(k) In Your 20s

Retirement may not be top of mind when you are in your 20s. However, it’s never to early to start contributing to a 401(k). Let’s take a look at how much you should contribute during your younger years.

How Much Should I Contribute To My 401(k) In My 20s?

There are several considerations to make when determining how much you should contribute. In general, it’s best to start with smaller contributions, and expand on the amount later on. Below, are four factors you must consider before contributing to your 401(k).

1. Determine Your Ideal Retirement Age

It’s crucial to really think about the age of your potential retirement. You’ll want to estimate when you’d like to retire prior to contributing to a 401(k). Of course, this can be hard to determine at such a young age, but you should already have an idea of what kind of lifestyle you’d like to enjoy in the future.

Start by deciding on your ideal retirement age, then work backward to figure out how much you’ll need to save each month to retire by that age. Compound interest will play a large role in helping you reach your desired savings amount.

2. Figure Out How Much You Can Save

After determining your retirement age, you can work to figure out what percentage of your income you’ll be able to save. Look at your after-tax monthly income and all your expenses. Figure out how much you have left over at this point. If it’s $400, consider putting at least half that amount into your 401(k).

You will be able to schedule automatic monthly withdrawals from your savings or checking account to put toward your retirement fund. After all, if the money goes directly to your retirement account, you likely won’t miss it.

3. Understand 401(k) Contributions

The financial experts recommend saving at least 15% of your pre-tax income and putting that toward retirement. One benefit of contributing to a traditional 401(k) is that this will be done using pre-tax income, meaning you’ll get a tax deduction for the contributions. For instance, if you make $3,000 per month, contributing $100 to your 401(k), you will only be taxed for $2,900 in the month.

Contributing early to your 401(k) gives you plenty of time to make your money back in case of any unfortunate economic swings. Even the most seasoned investors and experts have trouble predicting turbulent economic times.

An employer match is another reason why you should contribute to a 401(k). Many employers will match your contributions up to a certain extent. Essentially, an employer match is free money used to grow your retirement savings.

4. Consider Opening Traditional Or Roth IRA

You should consider opening a traditional or Roth IRA alongside your 401(k). A Roth IRA is funded with your after-tax dollars, while the traditional version is funded via pre-tax income. Both of these IRAs allow you to withdraw money without penalty after the age of 59.

If you have any extra money left in your budget at the end of the month, funding IRAs can put you on a fast track to a comfortable retirement. The more time your funds have to grow, the larger they will be come time for retirement.

Conclusion

If you are still unsure about how much you should be putting in your 401(k), then consider reaching out to a financial expert for advice. Starting to save now will prevent you from having to contribute higher amounts in the coming years.

Tax Settlement in Mesa, Arizona

If you need IRS Debt Help, Tax Debt Settlements or Tax Debt Advising in Phoenix, Mesa or anywhere else, Tax Debt Advisors can help! Give us a call at 480-926-9300 or fill out our contact form for a free consultation.

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