The child tax credit is a tax benefit that can reduce the financial burden faced by American families with young kids. While the child tax credit has been present in previous years, the amount eligible taxpayers can receive as a…
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Donât wait til April to figure out how to file independent contractor taxes. Hereâs a crash course in what you need to know about how to file taxes for freelance work.
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.
At a time when many Americans are paying more for everything from gas to ground beef, tax refunds will provide much-needed cash for many families. And this year, those refunds could be particularly generous.
Through the March 4, the average federal tax refund was $3,401, up 13.7% from the same period last year, according to the IRS. In 2021, the average refund was $2,815.
People who expect a big refund tend to file early, so the average for the 2022 tax season may be lower. Still, there are several reasons many taxpayers could get a larger refund this year. Taxpayers who were eligible for a third Economic Impact Payment and didn’t receive a check, or received less than the full amount, will have the opportunity to claim the recovery rebate credit when they file their 2021 tax return. The credit is worth up to $1,400. Likewise, taxpayers who were eligible for the expanded child tax credit, worth up to $3,600 in 2021, will have an opportunity to claim it when they file their 2021 tax return.
The IRS sent out advance child tax credits in six monthly payments last year, but not everyone who was eligible for the payments received them. If you had a newborn last year, for example, you didn’t receive the advance credits because the IRS didn’t have a record of the addition to your family. But when you file your 2021 tax return, you’ll be able to claim the credit.
Young adults may also receive a larger-than-expected refund this year because of a provision in the American Rescue Plan that expanded the earned income tax credit, which is designed to help low- and moderate-income workers. The legislation expanded eligibility for the credit to include workers between age 19 and 24 who don’t have children.
Nearly 60% of taxpayers expect to receive a refund this year. If you’re interested in investing all or part of your money, many brokerage firms will allow you to open an account for less than $500, and some have no minimum requirements. Coinbase, an online platform for cryptocurrency investors, says taxpayers who file their returns using TurboTax can have their refunds converted into Bitcoin, Ethereum or one of the other cryptocurrencies the company supports.
Cryptocurrencies are extremely volatile. Risk-averse investors may want to invest their refunds in Series I bonds. I bonds issued from November 2021 through April 2022 yield a composite rate of 7.12%. You can buy up to $10,000 each year in electronic I bonds and apply your tax refund to purchase up to $5,000 in paper bonds.
Finally, although it’s nice to get a check from the IRS, there are more-effective ways to use your money than giving the government an interest-free loan. The IRS offers a tool on its website that you can use to adjust your withholding.
Working from home is great, but it often comes with surprise expenses. Here are 11 tax deductions you canât afford to overlook.
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.
When life insurance policy types are listed and described, the focus is usually on two of them: term life and whole life policies. There are more types than those two, though, and theyâre typically more complex. They include universal life insurance â and, as a subset, indexed universal life insurance, or IUL. This is an […]
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Like everyone else, farmers and fishermen must pay federal income taxes throughout the year as they earn income. If those taxes aren’t paid through withholding from wages or other sources, quarterly estimated tax payments are typically required. If Uncle Sam doesn’t get paid on time, you could be looking at a stiff IRS penalty. However, if at least two-thirds of your gross income is from farming or fishing, there are a couple of loopholes that let you adjust the normal timetable for making estimated tax payments or avoid them altogether.
First, qualifying farmers and fishermen can pay all the estimated tax they owe with just one payment if the payment is made by the due date for the last quarterly payment of the year. For the 2021 tax year, the last payment was due January 18, 2022 (it’s due January 17, 2023, for the 2022 tax year).
Second, qualifying farmers and fishermen don’t need to make any estimated tax payments at all if they file their personal income tax return for the year by March 1 of the following year and pay any tax owed at that time. (Note: If it falls on a Saturday, Sunday or legal holiday, the March 1 due date shifts to the next business day.)
According to the IRS, taxpayers are having a difficult time electronically filing Form 7203, S Corporation Shareholder Stock and Debt Basis Limitations. Because of this problem, some farmers and fishermen may not have been able to e-filing their 2021 tax returns by the March 1, 2022, due date. As a result, the IRS is pushing the March 1 deadline to April 18, 2022 (April 19 for farmers and fishermen living in Maine or Massachusetts).
The extension will automatically apply to any qualified farmer or fisherman who doesn’t report an underpayment penalty on their 2021 tax return. For those who already filed their tax return and included the penalty, the penalty can be abated by filing Form 843, Claim for Refund and Request for Abatement. When filing Form 843, make sure you:
There are a couple of other special rules for farmers and fishermen that can help them avoid the estimated tax underpayment penalty â although there’s no relief this year from the IRS that affects them.
The penalty for not paying enough tax during the year through withholding or estimated payments doesn’t apply if you owe less than $1,000 in tax. The penalty is also avoided if your withholding or estimated tax payments equal at least 90% of your tax liability for the year, or 100% of the tax shown on your previous year’s return (110% if your adjusted gross income for the previous year was more than $150,000).
For qualifying farmers and fishermen, the penalty is avoided if their withholding or estimated tax payments equal just 66.667% of their tax liability for the year (as opposed to the normal 90% requirement), or 100% of the tax shown on their previous year’s return. Also, the higher percentage (110%) requirement for higher-income taxpayers doesn’t apply for qualifying farmers and fishermen.