Keith Mack
Tax law is a complex area, and it can be challenging to know where to start when trying to answer tax-related questions. The first step is to understand the basics, such as who pays taxes and the difference between credits and deductions. It's also important to be aware of how taxes impact the economy and what constitutes sound tax policy. When it comes to filing tax returns, individuals often seek the advice of certified public accountants (CPAs) who can provide expertise on tax adjustments, deductions, and credits. Online tools and websites such as TurboTax and the IRS website also offer guidance on common tax questions and topics. For more complex or specific queries, individuals can seek free advice from lawyers on forums or consult tax professionals directly.
| Characteristics | Values |
|---|---|
| Who to ask | Certified Public Accountants (CPAs) or tax attorneys |
| Where to find them | Online platforms like TurboTax, Justia Ask A Lawyer, or the IRS website |
| What they can help with | Tax returns, tax adjustments, deductions, and credits, inheritance, property transfer, etc. |
| Tools to use | Interactive Tax Assistant (ITA) by IRS, TurboTax Live Assisted Basic, etc. |
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What You'll Learn
How to find a tax professional
When looking for a tax professional, it is important to be diligent. Anyone can be a paid tax return preparer, but they should have an IRS Preparer Tax Identification Number (PTIN). Taxpayers should be careful to avoid unethical "ghost" return preparers. The IRS provides a directory of Federal Tax Return Preparers with Credentials and Select Qualifications, which can help you find professionals with PTINs and IRS-recognised credentials.
You can also check professional organisations that many tax preparers belong to, as these often have codes of ethics and professional conduct requirements. The National Association of Tax Professionals (NATP) is one such organisation, which believes that all taxpayers should be supported by caring and well-educated tax professionals. Other organisations include the National LGBT Chamber of Commerce, the National Society of Black Certified Public Accountants (NSBCPA), and the National Society of Enrolled Agents (NAEA).
If you already work with a financial advisor, they may be able to connect you with a tax professional. You can also ask your peers, family, and friends for recommendations. When considering a tax professional, it is important to look into their credentials and work history. You can check the preparer or firm's reputation with the Better Business Bureau (BBB).
Finally, it is important to note that not all tax professionals are CPAs, and not all CPAs work in tax. Enrolled Agents are licensed by the IRS and specialise in tax issues, but may not have as broad a financial background as a CPA. Attorneys also tend to have broad backgrounds, with many specialising in areas like real estate or trusts.
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Understanding tax credits and deductions
Credits and deductions are a great way to reduce your tax bill or increase your refund. Both individuals and businesses can benefit from these strategies.
Tax Credits
Tax credits directly reduce the amount of tax you owe, giving you a dollar-for-dollar reduction in your tax liability. For example, a $1000 tax credit will lower your tax bill by the same amount. Some credits are refundable, meaning you can get money back even if you don't owe any tax. To claim credits, you need to answer questions in your tax filing software or complete a form if you're filing a paper return.
Tax Deductions
Tax deductions reduce your taxable income, which in turn lowers the amount of tax you need to pay. For example, if you fall into the 22% tax bracket, a $1000 deduction saves you $220. Most people take the standard deduction, which lets you subtract a set amount from your income based on your filing status. You don't need to do anything extra to qualify for the standard deduction and you can claim it on Form 1040. However, if you have significant deductible expenses or losses, you may be better off itemizing your deductions. This allows you to take advantage of specific deductions such as home mortgage interest, medical expenses, or charitable donations.
Eligibility
To qualify for tax credits and deductions, you need to meet certain criteria set by the IRS. These criteria are based on factors such as your filing status, current life events, and the amount of your taxable income.
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How to file a tax return
Filing a tax return can be a complicated process, and it is important to be aware of the steps involved and the deadlines that must be met. Here is a guide on how to file a tax return.
Firstly, check if you need to file a tax return. This may depend on factors such as your income, whether you own a business or have side income, or if you are taking the standard deduction or itemizing your return. If you are unsure, the IRS website can provide guidance. It is important to determine this early on, as it will impact the subsequent steps and deadlines you need to meet.
Next, gather the necessary documents and determine your filing status. You will need forms and receipts that show your income and any tax-deductible expenses. This includes receipts for charitable donations, mortgage interest, state and local taxes, medical and business costs. Your filing status will depend on factors such as your marital status and the percentage you contribute to household expenses.
Then, decide how you want to file your taxes. The IRS recommends using tax preparation software to e-file for faster and more accurate returns and refunds. There are various options available, including IRS Direct File, which is free for those with an adjusted gross income of $84,000 or less. Alternatively, you can use paper forms and mail them to the IRS, but this may take four weeks or more for processing.
After filing, remember to keep track of your return and refund status. If you have any questions or issues, it is recommended to first seek answers online, and then, if needed, contact the IRS through their website, by phone, or in person.
Finally, be aware of the tax deadlines and any applicable extensions. The deadline for filing and paying any taxes owed is usually in April, and late filing or payment may result in penalties and interest. If you need more time, you must request an extension by the deadline, but this does not extend the time to pay any taxes owed.
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How to amend a tax return
Mistakes on tax returns can be corrected by filing an amended tax return. The Internal Revenue Service (IRS) allows taxpayers to amend their tax returns if they discover an error on a return that has already been filed. This can be done by filing Form 1040-X, Amended U.S. Individual Income Tax Return, which can be done electronically or on paper. This form is used to amend previously filed individual income tax returns on Forms 1040, 1040-SR, 1040-NR, or 1040-SS/PR. The amended return will replace the original return.
To file Form 1040-X, you will need the information from your original tax return, any new documentation or forms, and an explanation of what was changed. You can file up to three amended returns for the same tax year. It is important to note that Form 1040-X should not be used to report clerical errors, as the IRS will correct these types of mistakes on its own. Instead, Form 1040-X should be used to report important changes, such as correcting your filing status, adding or removing a dependent, claiming tax deductions or credits you missed, or adding taxable income you forgot to include.
There are time limits for filing an amended return. Generally, to claim a refund, you must file an amended return within three years after the date you filed your original return or within two years after the date you paid the tax, whichever is later. If you filed your original return early, count from the April tax deadline. If you are filing an amended return after the time limit for claiming a refund has passed, the IRS will not pay any refund you claim, but they may accept any payments you send if you owe taxes.
Before filing an amended return, it is recommended to review your entire original return to spot any additional tax savings, such as missed credits or deductions. You should also ensure that the IRS has already processed your original return before filing an amended one. Additionally, if you change your federal return, it may affect your state tax liability, so it is important to contact your state tax agency for information on how to correct your state tax return.
If you have questions about amending your tax return or need further assistance, the IRS offers several online tools and resources to help taxpayers find answers to their tax questions. You can also seek advice from tax professionals, such as Certified Public Accountants (CPAs), who can provide valuable insights and ensure that your tax return is accurate and provides you with the best outcome.
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How to answer tax law questions for free
There are several ways to get help with answering tax law questions for free. Firstly, the IRS provides various resources, including the Interactive Tax Assistant (ITA), which allows users to choose a topic and enter basic information to find answers to their tax questions. The IRS website also offers forms and publications for taxpayers, including those with visual impairments. Additionally, the IRS helpline can be contacted for tax-related queries.
Another option is to utilise the services of local resources and non-profit organisations that provide free tax assistance. These include public libraries, community centres, and senior centres, which often hold tax preparation workshops or seminars. Furthermore, federal programs such as the IRS Free File program offer free tax help to taxpayers, especially those with an adjusted gross income (AGI) of $84,000 or less. Similarly, the Direct File program, available in 25 states, enables taxpayers to file their taxes directly with the IRS at no cost.
For those in the military, MilTax provides free tax assistance and specialised tax-filing software, with professional consultants available year-round to answer queries. Additionally, the Low-Income Tax Clinics (LITCs) assist taxpayers below certain income thresholds in resolving disputes with the IRS, often for free or a small fee.
Online resources, such as TurboTax, also provide free editions or tools to answer common tax questions. These tools guide users through the process of filing taxes and provide expert advice without any cost implications.
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Frequently asked questions
CPA stands for Certified Public Accountant. CPAs can provide invaluable advice and insights on tax-related matters, ensuring that you file an accurate tax return.
You can file Form 1040-X, Amended US Individual Income Tax Return, electronically with tax filing software to amend your Form 1040, 1040-SR, 1040-NR, or 1040-SS/PR for the current or two prior tax periods.
Gambling winnings/losses can be claimed by reporting them on your tax return. Consult a CPA or a tax professional for specific guidance on how to do this accurately.
One example of a common tax law question is "Which exemption applies for transferring property to an irrevocable trust, and what is the process?"
You can reduce your taxable income by taking advantage of tax deductions and credits. For example, contributing to an employer-sponsored retirement plan, such as a 401(k) or an individual retirement account (IRA), can lower your taxable income.
