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The 16 Most Asked Tax Questions


1. What documents do I need to do my taxes?

There are two common tax forms that taxpayers receive in the mail: a W-2 from your employer or a 1099-INT for bank interest from a savings account. There are also other pieces of supporting information you should have in front of you when you sit down to do your taxes, such as the correct Social Security numbers for yourself, your spouse and anyone you are claiming as a dependent. Also, if you made a charitable contribution within the last year, be sure to gather receipts of your donations to turn your good will into tax-time savings.

2. When are taxes due?

It’s April 18 this year. Usually, it’s the 15th — you can read why you get an extra three days here. (If you file for an extension, you get until Oct. 16 to file your return, because Oct. 15 is a Sunday. You must still pay what you estimate you owe by April 18, though.)

3. When can you file taxes?

You technically have until 11:59:59 p.m. on April 18 to file your taxes if you’re filing online. you have to have your return and payment postmarked by April 15. Some post offices stay open late for Tax Day; you can find out which ones have extended hours here.

If you (or your accountant) file your taxes electronically, you have the option of paying online using the IRS’s Electronic Funds Withdrawal function (which is free). You can also pay via credit or debit card (which will cost you a convenience fee of a bit under $3 if you use a debit card, or around 2% of the charge if you use a credit card).

4. Are there any benefits to filing early? And what happens if I file after the deadline?

The main benefit of filing before April is getting your tax refund back sooner. But filing really close to the deadline could also cost you money. "If you're working with a CPA and you dump your tax stuff on them two weeks before April 15th," Vent says, "most people will charge you a premium." And doing your taxes earlier will mean that if you hit a snag like a missing form or needing to resolve a big question, you have more time to solve it.

5. How to file a tax extension?

If you procrastinated and April 18 is looking like a long shot, experts say you should file for an extension. This doesn’t get you out of paying any taxes you owe by the deadline, but it gives you an extra six months to file. An extension will keep you from getting hit with a late-filing penalty of 5% of the unpaid taxes for each month or part of a month you’re late, up to 25%.

That’s in addition to a late-payment penalty of 0.5% of the unpaid taxes for each month or part of a month—plus interest at a rate of the federal short-term interest rate plus 3%.

If you expect a refund, you obviously have an incentive to get your return in as soon as possible to get those dollars in your pocket. If you file for an extension thinking you’ll get a refund and instead find that you owe, you’ll have to tack on the late-payment charges.

Don’t forget about state taxes. A handful of states will automatically give you an extension if you request one through the IRS, while others require a separate request to that state’s tax department. In some cases, the rules are different depending on whether you owe money or are due a refund.

6. How much do you have to make to file taxes?

There are various thresholds, depending on your filing status, age, and the type of income you receive. For instance, if you’re single, under 65 and your income was below $10,350 last year, you generally don’t need to file federal taxes. This IRS tool can help you figure out if you need to file a tax return.

Even if appears you don’t have to file, experts say it’s generally a good idea to fill in the blanks on a return and see what your bottom line would be. About 70% of Americans are expected to qualify for refunds this year, according to the IRS, but many people never file to collect. The average unclaimed refund is nearly $700. Especially for lower-income Americans, many credits and deductions could make you eligible for a refund.

7. How long to keep tax records?

The IRS says you should hang onto your tax documents for three years; if you get audited, that’s generally the look-back period they’re allowed to cover. However, if they suspect fraud or underpayment of income tax, or if you’ve written off worthless securities, they can request up to seven years’ worth of tax records. Hang onto documents like receipts that justify deductions like business expenses, charitable donations and so on.

8. When is the last day to do taxes?

Yeah, there are clearly a lot of procrastinators out there. As explained above in No. 1, the filing deadline is pushed back a few days from the usual April 15 this year to the 18th. You have until midnight local time—but if you’re going to put it off that long you should consider just filing for an extension.

9. I'm married but I want to file my taxes as married filing separately, because my spouse and I like to keep our finances separate. Is that OK?

It actually doesn't matter if you and your spouse have completely separate bank accounts, as long as you are married. If you want to file separately, you can, but you might miss out on some advantages that couples who file jointly get. Jointly filing couples get a bigger standard deduction, can take two exemptions, and can take multiple credits like the Earned Income Tax Credit, the American Opportunity and Lifetime Learning Credits, the exclusion or credit for adoption expenses, and the Child and Dependent Care Credit. And filing separately could even lower how much you're allowed save tax-free for retirement.

But it's also possible you would pay less filing separately, perhaps because you want to deduct medical costs—a very big deduction—and filing jointly would mean your combined income is too high to do so.

We could go through all the pros and cons, but it all depends on your specific situation. You can consult a tax preparer, who can give you a definitive answer on which will get you the bigger refund after looking at your situation. Or if both your finances are simple, online tax filing software will compare your refund for filing separately and jointly.

There's another thing to consider too: Filing jointly puts you on the hook for your spouse's tax debt if he doesn't pay, and any misinformation he puts on his return. If this makes you uncomfortable, even if you just know your spouse's business has complicated taxes file separately.

10. Is Social Security taxed?

It’s possible. Depending on your income, up to 85% of Social Security benefits may be taxable. If you’re a single filer and your combined income—that is, adjusted gross income, nontaxable interest from municipal bonds and half of your Social Security benefits—is more than $25,000, you will have to pay taxes. If you’re married and file jointly, the threshold is $32,000.

11. How long does it take to get taxes back?

The answer this year might be “longer than usual.” To combat tax fraud, the IRS is taking extra time checking filers’ tax information if they claimed either the Earned Income Tax Credit or the Additional Child Tax Credit. Under a new law, the agency is holding back refunds claiming those credits until at least Feb. 15, and people aren’t likely to see those refunds until the end of February at the earliest. On top of that, “New identity theft and refund fraud safeguards put in place by the IRS and the states may mean some tax returns and refunds face additional review,” the agency warns. For everybody else, the IRS says refunds should be issued in its standard window of 21 days from the time it gets your return.

12. Why do I owe taxes?

The first income tax in the U.S. was authorized by Congress in 1861 and levied the following year, to help pay for the Civil War, according to the Civil War Trust, but taxes have been around nearly as long as civilization itself. Historians have found tax records that go back to 6,000 B.C. in what is now Iraq, and the ancient Greek, Egyptian and Chinese cultures all had their own versions. In Biblical times, Roman emperor Caesar Augustus established rules around some personal and inheritance taxes that the English later used to create similar taxes centuries later, according to the Handbook on Tax Administration. Ironically, modern-day Italy has the lowest rate of income-tax compliance out of 10 major developed nations, with less than two-thirds of citizens giving the tax man his due. And although plenty of Americans have argued in court that they should

13. I didn’t make much money last year – do I still need to file my taxes?

Americans should file a 2013 federal income tax return even if their total income is below the Internal Revenue Service filing requirement ($10,000 for individuals or $20,000 for married filing jointly under age 65). You need to file the return to get a refund on any withheld federal income tax and especially if you’re eligible for refundable tax credits like the earned income tax credit. Every year, money is left on the table because people don’t think they need to file. The average unclaimed tax refund is more than $600, and it’s important to know that the IRS places a three-year window on claiming these past refunds.

14. Who can I claim as a dependent?

This question has stumped taxpayers for years and is one of the most frequently asked questions I hear during tax season. Most of us know you can deduct your children on your tax return, but many people forget they might be able to deduct elderly parents, significant others or other relatives who also qualify as a dependent. Do you have a relative or significant other you’ve been supporting or a friend who’s been sleeping on your couch? They may turn out to be a tax deduction if they can be claimed as a “qualifying relative.” They’ll have to meet certain requirements to qualify, but for each dependent you can deduct $3,900, which is likely to reduce your taxes.

15. What tax deductions and credits are available for parents?

Did you have a baby last year? A child means you may receive a dependent exemption of $3,900, which reduces your taxable income by that amount. Even if your baby was born on Dec. 31, 2013, you are still eligible for this deduction.

Child and dependent care tax credit: If you paid for child care you may be eligible for a tax credit worth up to $1,050 for your child.

Earned income tax credit: This refundable tax credit is advantageous and available to low- to middle-income working Americans. The credit could be as much as $6,044 for someone with three or more children.

Child tax credit: Do you have a big family? This credit may be worth $1,000 for each of your children under age 17.

16. What tax benefits are available for college students?

To help alleviate the ever-increasing cost of a college education, the tax code provides some relief options, which are available via education tax credits and deductions. Knowing the types of items, you can deduct can save you money on college expenses because you may be able to deduct things like tuition or fees, books and supplies for you, your spouse and your dependents. Some education deductions and credits include:

The American Opportunity Tax Credit: Helps parents and students pay for college education by giving them a credit up to $2,500 per student for tuition and fees, books, supplies and equipment.

Lifetime Learning Credit: Taxpayers may be able to claim a credit up to $2,000 per tax return for college tuition, fees and supplies paid directly to the educational institution.

Tuition and fees deduction: An education benefit which allows you to deduct up to $4,000 from your taxable income for college expenses.