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File a Tax Extension Now to Beat Today’s Deadline

For most people, federal income tax returns are due today – April 18 (they’re due tomorrow for people who live in Maine and Massachusetts). However, if you can’t submit your return before the midnight deadline, you need to request a tax filing extension instead. The extension is automatic – you don’t even need a reason for putting off your tax return – but you still have to ask for it. Once you do that, you won’t have to file your 2021 federal tax return until October 17, 2022.

  • SEE MORE Pros and Cons of Getting a Tax Extension

You still have to pay any taxes due, though. The extension is just for filing your return…not for paying what you owe. So, estimate how much tax you’ll owe (if any) when you do file your return and pay that amount today. But make sure you don’t estimate too low, because the IRS will charge you interest if you’re short. Penalties might be tacked on, too. When you file your 2021 tax return later (before October 17), you can subtract the amount you pay now from the overall tax due as shown on the return.

You can request an extension by filing Form 4868 or by making an electronic tax payment to the IRS. Either way, you need to act before your federal income tax return filing deadline expires tonight (or tomorrow night for residents of Maine and Massachusetts).

Special tax extension rules apply for Americans living abroad and people serving (or who served) in a combat zone or contingency operation. As a result, they might not have to file their 2021 tax return and pay whatever tax they are expected to owe by the end of the day today, and they could receive an extension past October 17. Victims of certain recent natural disasters also get more time to file their 2021 federal tax return and pay their tax bill. They can also wait until their new tax return filing deadline to request an extension to October 17.

And don’t forget about your state tax return. Unless you live in a state with no income tax, your state return may be due today as well (although some states have later deadlines) As for state tax return filing extensions, the rules and deadlines are often similar to the federal requirements. However, you need to check with the tax agency in your state to find out when your return is due and to see exactly how tax return filing and payment extensions work where you live.

For more detailed information about federal tax extensions and how to request them, see How to Get More Time to File Your Tax Return.

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2021 Tax Returns: What’s New on the 1040 Form This Year

Time is running out if you haven’t already filed your 2021 federal tax return. For most people, the tax return filing deadline is April 18 this year (residents of Maine and Massachusetts get one extra day). So, for all you tax procrastinators out there, it’s time to get moving. One of the first things you should do is collect and organize your tax records. If you’re going to file your own 1040, you should also check out tax software options. If you need more time to file your return, request a tax filing extension (although you’ll still have to pay any tax you expect to owe). And, no matter when you fill out your 2021 tax return, you first want to familiarize yourself with the tax law changes that may impact it.

Many (but not all) of the new items on the 2021 1040 form come from the American Rescue Plan Act, which was enacted last March. This Covid-relief bill made changes to the child tax credit, child and dependent care credit, earned income tax credit, and more. Other changes stem from the expiration of earlier Covid-related provisions that expired at the end of 2020. There are a few modifications to some of the main 1040 schedules, too. And, of course, there are the normal inflation-based adjustments that occur every year.

There are many reasons why you should know and understanding these changes up front. First and foremost, it very well may result in a larger tax refund or a smaller tax bill. You’re also likely to get through your return faster if you’re already aware of any new twists and turns. If someone else prepares your 1040, it will be easier to catch any errors when you review the return. But since “Tax Day” is right around the corner, you don’t have much time left to get up-to-speed on what’s new and changed for your 2021 tax return. So take a look at our list below and study up now so you know what to look for before tackling your 1040.

  • SEE MORE 11 Reasons to File a Tax Return Even If You Don’t Have To

File a Tax Extension Now to Beat Monday’s Deadline

For most people, federal income tax returns are due on Monday, April 18 (they’re due April 19 for people who live in Maine and Massachusetts). However, if you can’t submit your return before the upcoming deadline, you need to request a tax filing extension instead. The extension is automatic – you don’t even need a reason for putting off your tax return – but you still have to ask for it. Once you do that, you won’t have to file your 2021 federal tax return until October 17, 2022.

  • SEE MORE Pros and Cons of Getting a Tax Extension

You still have to pay any taxes due, though. The extension is just for filing your return…not for paying what you owe. So, estimate how much tax you’ll owe (if any) when you do file your return and pay that amount now. But make sure you don’t estimate too low, because the IRS will charge you interest if you’re short. Penalties might be tacked on, too. When you file your 2021 tax return later (before October 17), you can subtract the amount you pay now from the overall tax due as shown on the return.

You can request an extension by filing Form 4868 or by making an electronic tax payment to the IRS. Either way, you need to act before your federal income tax return filing deadline (April 18, or April 19 for residents of Maine and Massachusetts).

Special tax extension rules apply for Americans living abroad and people serving (or who served) in a combat zone or contingency operation. As a result, they might not have to file their 2021 tax return and pay whatever tax they are expected to owe by April 18, and they could receive an extension past October 17. Victims of certain recent natural disasters also get more time to file their 2021 federal tax return and pay their tax bill. They can also wait until their new tax return filing deadline to request an extension to October 17.

And don’t forget about your state tax return. Although state tax filing extension rules and deadlines are often similar to the federal requirements, you need to check with the tax agency in your state to see exactly how tax return filing and payment extensions work where you live.

For more detailed information about tax extensions and how to request them, see How to Get More Time to File Your Tax Return.

  • SEE MORE 10 Tax Deadlines for April 18 (It’s Not Just the Due Date for Your Tax Return)

Everything You Need to Know About a Reverse Mortgage: Pros and Cons

For retirees whose main asset is their house, a reverse mortgage can look very attractive. But is it a smart move?

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Estimated Tax Payments Are Due April 18

Under our country’s “pay as you go” tax system, Uncle Sam wants to collect his cut periodically throughout the year as you earn income. In most cases, the required taxes are paid through paycheck withholding (your employer sends in the payments). But if you’re self-employed or don’t have taxes withheld from other sources of taxable income (e.g., interest, dividends or capital gains), then quarterly estimated tax payments to the IRS are typically required.

  • SEE MORE Most-Overlooked Tax Deductions and Credits for the Self-Employed

Estimate tax payments for the first quarter of 2022 are due April 18. That’s for income earned from January 1 to March 31. And if the government doesn’t get paid on time, you could be looking at a stiff IRS penalty – so make sure you get your payment in on time.

If you didn’t have any taxable income in January, February and March, you don’t have to make an estimated tax payment on April 18. Just make sure you make an estimated payment later in the year for any quarter that you do have income that wasn’t subject to withholding.

If at least two-thirds of your gross income is from farming or fishing, you don’t have to make a payment on April 18, either. Instead, you can make just one estimated tax payment for the 2022 tax year by January 17, 2023. Or, if you file your 2022 tax return by March 1, 2023, and pay all the tax you owe at that time, you don’t even need to make a payment next January.

Victims of certain natural disasters don’t have to make estimated tax payments on April 18, either. Instead, their due date is extended to either May 16 or June 15, depending on the applicable disaster (see our 2022 Tax Calendar for more information).

Estimated Taxes Due Date for Maine and Massachusetts Residents

The due date for the first quarter estimated tax payment is normally due on April 15 each year. However, because the Emancipation Day holiday in Washington, D.C., falls on April 15 this year, federal law requires that the due date be moved to the next business day – which is April 18.

  • SEE MORE 10 Tax Deadlines for April 18 (It’s Not Just the Due Date for Your Tax Return)

For most people, that’s also the case for the deadline to file your 2021 federal income tax return. It was moved from April 15 to April 18 because of Emancipation Day. But for people who live in Maine or Massachusetts, the federal tax return filing deadline isn’t until April 19. That’s because April 18 is a state holiday – Patriot’s Day – in those two states. However, the first quarter estimated tax payment date is not moved to April 19 for residents of Maine and Massachusetts. The estimated payment is due on April 18 for them, too.

Calculating and Paying Your Estimated Taxes

Use Form 1040-ES to calculate and pay your estimated taxes. There’s a worksheet in the form instructions that will walk you through the calculation. If the estimate turns out to be either too high or too low, you can make adjustments when you send another quarterly payment for the 2022 tax year.

  • SEE MORE Pros and Cons of Getting a Tax Extension

The various payment methods are described in the instructions for the form. They include payment by electronic means as well as by check, cash, or money order.

Penalties for Failure to Pay Estimated Tax

If you owe at least $1,000 in tax for the year, you could be hit with a penalty if you don’t pay enough estimated tax throughout the year. However, the penalty won’t apply if the combined amount of your withholding and estimated tax payments for the 2022 tax year equal at least 90% of your 2022 tax liability, or 100% of the tax shown on your 2021 tax return (110% if your 2021 federal adjusted gross income was more than $150,000).

State Estimated Tax Payments

Also, unless you live in a state with no income tax, you might owe state estimated taxes, too. Check with the state tax agency where you live for state estimate tax payment due dates.

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How Much Should I Contribute to My 401k?

Once you set up your retirement plan at work, the next natural question is: How much should I put in my 401(k)? While there’s no ironclad answer for how much to save in your employer-sponsored plan, there are some important guidelines that can help you set aside the amount that’s right for you: e.g. the […]

The post How Much Should I Contribute to My 401k? appeared first on SoFi.

Is Crypto Investing Really Worth It?

There seem to be several camps of thought when it comes to investing in cryptocurrencies. The largest camp includes investment firms and investors who add certain “safer” cryptocurrencies to their portfolios after expending a minimal level of due diligence. For them, the choice to purchase and hold cryptocurrency is based on “FOMO,” fear of missing out, and a recognition (and willing acceptance) that the risk/reward determination behind the investment is similar to buying lottery tickets. Somebody will win, the logic goes; it might as well be me.

  • SEE MORE How Do I Spend My Bitcoin? (And Where?)

The other camps, the sizes of which are difficult to determine, have done sometimes extensive research and have concluded that cryptocurrencies are either:

  1. A Ponzi scheme dependent on a steady influx of greater fools,
  2. A foolproof way to get rich if you only stick with it, or
  3. The future of financial exchanges when crypto eventually replaces fiat currency, such as the U.S. dollar, which is backed by a centralized federal banking system. They think cryptocurrency will provide completely decentralized financial transactions that free investors from the currency manipulations of sovereign nations and wealthy oligarchs. They also believe crypto’s blockchain technology will revolutionize privacy and security in numerous uses, from medical records to voting records.

Just describing the basics of cryptocurrency requires a vocabulary that easily obfuscates its reality. Purveyors of crypto investing have been accused of dismissing valid inquiries as petty ignorance by the intellectually inferior. This article will address some of the promises and issues related to crypto so you can decide the most important question: Is crypto investing worth your time and money?

Understanding the basics

There are three ways to acquire cryptocurrency:

  1. After opening an online account, you can choose among a staggering number of cryptocurrencies to purchase through a brokered exchange. Your purchase and sale of the “coins” will look very similar to any other security, except that the market never closes and the price fluctuation is both highly volatile and completely untrustworthy.
  2. You can establish a “wallet” to hold crypto that you buy from someone else using one of many peer-to-peer online access points. This type of ownership carries much greater risks from price manipulation, scammers and a total lack of privacy (more on that later), but provides the free capitalist environment promised by an unregulated and decentralized exchange.
  3. Finally, you can create new coins for yourself by “mining” crypto.

Every unit of a cryptocurrency, the “coin,” is the product of a created “block” (and every coin consists of a million smaller digital units). The block is created when someone, a “miner,” applies a significant investment in a series of highly sophisticated and interconnected computers and servers (the hardware alone may cost more than $12,000) and in computing power (sources report as much as 86,000 kWh in electricity expended per coin, costing as much as $5,000 in some states) to solve a puzzle that is automatically presented following the successful solution of the puzzle before it. Any number of miners attack the puzzle at the same time, and the miner who solves it first adds a “block” to the “blockchain” that evidences the coins the winner received for the solution. Blockchain puzzles get solved about every 10 minutes, and the difficulty level and coins won for each new puzzle are dependent on the number of miners who attempted the previous one.

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The blockchain is a digital ledger that cannot be altered, with each new block appended to the ledger in the order of its creation. The blockchain is available to anyone with the desire to download it and a server with enough memory to hold the entire chain. The blockchain is tested for accuracy through a “proof of work” protocol that verifies the blockchain by comparing the ledgers recorded across these numerous storage servers. If someone attempted to alter the blockchain to obtain cryptocurrency fraudulently, the redundant ledgers would uncover the attempt and discard the alteration. It is this decentralized system for tracking ownership of cryptocurrency that is supposed to provide confidence in its value.

No one can say just how many such blockchain ledgers are stored for each cryptocurrency, how often attempts are made to introduce a fraudulent ledger or how such ledgers are sorted out if several different versions are created at once. Considering the cost and fragility of the hardware, the unavoidable occurrence of human error and negligence, and the already well-documented fraud and theft related to crypto, any confidence in this decentralized governance of its accuracy and valuation may be foolhardy.

The limitations of crypto

But let’s talk about the market for crypto. In spite of stories about a few countries and retailers accepting cryptocurrency, which have been debunked or proven insignificant, crypto may now only be exchanged for actual fiat currency or other digital assets in the form of “non-fungible tokens” or NFTs. We are a long way from establishing the market confidence in the value and stability of cryptocurrency necessary for it to be used for the purchase of goods and services, bypassing fiat money. And that’s the rub: There is no reason to believe that even the most exchanged cryptocurrency will ever achieve the price stability necessary for sellers to accept it. Today, there is no market for direct exchange of cryptocurrency, with purchases instead relying first on liquidation of the crypto to a fiat currency.

The Internal Revenue Service (IRS) treats crypto as a financial asset or property and will treat properly documented gains and losses in crypto liquidation just like other assets. You may note that the 2022 Form 1040 includes a question whether you have ever purchased crypto, even if you haven’t sold any. Which leads us back to privacy. Transactions in crypto are completely transparent to anyone sophisticated enough to review the blockchain. This digital trail will certainly be used by governments to track exchanges. It is already undeniable that crypto is being used in money laundering, ransomware attacks and other criminal activities to avoid federal banking oversight. Even if the blockchains are secure, other crypto repositories, such as exchanges and wallets, have been hacked, with reported losses in the millions of dollars.

Today’s crypto price volatility is absolutely untethered from any expectation of its use as currency. The volatility crypto owners experience now is the product of rumor and speculation. This is why some feel that cryptocurrency is a Ponzi scheme fueled by stories of sellers taking advantage of the huge price swings that occur when celebrity investors and billionaires engage in promotions or whenever a new record is set for a crypto purchase of digital art. In fact, the only way to make money on crypto is to sell out when others are heavily buying in, since the coins have no intrinsic value and aren’t tied to any production or services.

The rise of NFTs

Finally, about digital art. Today, we see many examples of blockchain technology being used to create non-fungible tokens, or NFTs. An NFT really is a token, a stand-in for any digital creation one may house there. It could be a photo in the form of a JPEG file, a video file, a text file (such as a contract, a deed to property, a single vote for a political candidate or a poem) or any number of other supposedly unalterable digital creations. The value of the NFT is not in any apparent uniqueness, since it can be readily copied, but in its actual uniqueness, because it is forever tied to its place in the blockchain.

However, an NFT only has the value one might exchange for it, either in other NFTs or in cryptocurrency coins. For example, if I buy a NFT digital artwork for one Bitcoin today (Bitcoin is trading as I type this at $38,686 per coin), then the seller could sell that coin immediately for dollars or could hold onto that coin in hopes it will trade higher later. For example, Bitcoin traded at about $67,000 per coin on Nov. 7, 2021, but also traded for about $29,000 per coin on July 19, 2021. What will it trade for next month?

The Wild West

All this is not to say that cryptocurrency as an investment and a method of exchange will or should be eliminated. Blockchain technology is an incredible advancement in the security and utility of information exchanges. Certain appropriate uses are already emerging. And investing in more speculative alternative assets is certainly an appropriate part of a diversified portfolio. But we’re in the Wild West of cryptocurrency today and, like the Western territories in American history in which intrepid homesteaders traced the paths of the explorers, one must consider the inherent risks faced by early adopters.

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