Navigating the maze of tax rules, and filing regulations can be confusing, especially if you are new to filing for yourself, filing in a different bracket, or filing as a business for the first time.
Here are a few of the most common tax-related questions, and their answers.
1. When are Tax Returns Due this year?
This year’s tax filing deadline is April 15, 2019
. This news isn’t particularly surprising since April 15 has long been the day on which taxes are due. For the past two years, however, the tax filing deadline has been pushed back several days because April 15 fell out over a weekend and the following weekday conflicted with Emancipation Day, a federal holiday. As such, there could be lingering confusion over when taxes are due this year. Mark your calendar. April 15th
2. Which Tax Form Should I File?
There are three main tax forms for standard tax situations: 1040, 1040A, and 1040EZ
. Form 1040EZ is the simplest but comes with the most restrictions, allowing only certain types and amounts of income, deductions, and credits. These forms are suitable for independent contractors and people with simple tax situations.
A Limited Liability Company (LLC) will file one of the following depending on its situation.
- Form 1040 (Schedule C, E, or F) (appropriate for single-member LLCs)
- Form 1065 (Partnership) (appropriate for multiple member LLCs)
- Form 1120S (S Corporation)
- Form 1120 (Corporation)
3. What’s the Difference Between an Exemption, Credit, and Deduction?
Exemptions and deductions work the same way. They reduce your taxable income, which lowers your tax bill. For example, if you take a $1,000 deduction, and you’re in the 20% tax bracket, you could save $200 on your taxes. Or if you get a $3,800 exemption, that’s about $760 less in taxes.
4. What filing status should I use?
Your tax filing status is determined by what your marital status was
as of Dec. 31 of the tax year in question. So if you got married on Dec. 30, then you’ll need to file using one of the two married filing statuses. If you got divorced on Dec. 30, then you’ll need to file as a single person. If the change happened right after the beginning of 2018, then you’ll file under your old status in 2017 and then adopt the new status when you file next year.
5. I’m Being Audited! What Questions will I be Asked?
If you find yourself in the scope of an IRS audit, There is a long list of IRS audit questions
you will be asked, and you will be responsible for providing valid answers and providing the proper financial documentation required.
Among the most commonly asked questions in an audit are
- How do you (and your spouse) earn a living?
- Has all income and or deductions been reported on the tax return?
- Are you aware of any changes that should be made to you return?
- Do you have any hobbies?
- Do they generate income?
- If so, was such income reported on the tax return?
- Do you engage in any bartering activities? If so, what type?
- Did you have $10,000 or more cash transactions for this tax year?
- Who did you bank with during the tax year?
- Type of financial accounts:
- Do you have any foreign bank accounts?
- If so please, describe and identify foreign bank accounts.
- Do you have a safe deposit box?
- If so, describe the contents
- Do you keep cash and/or securities in another location besides a bank, financial institution or a safe deposit box?
- If so please describe?
- Do you keep money in a hidden location, such as buried in the back yard, in a safe, in the freezer, mattress, wall, floor, etc?
- If so, describe approx. amount kept
- Did you have any non-taxable sources of income during the tax year?
These are just a few of the commonly asked tax and audit questions. If you find yourself in the scope of an IRS audit, secure the services of a licensed tax attorney in your area.