Boston residents share one big question with others across the country: how long should they retain their federal income tax returns and their supporting documents. Answering this question may not be as simple as people think. However, the IRS generally only goes back three years for an audit, but that could be extended depending on a person's circumstances.
In recent weeks, life has changed across the country. It is hard to find any one unaffected by recent events, including here in Massachusetts. Trying to keep up with the changes may seem like an uphill battle. For instance, IRS deadlines that most taxpayers used to rely on have changed dramatically recently.
With everything that is going on across the country right now, the federal government is making certain concessions to help the public. One of them has to do with the IRS and income taxes. The news reports may not have been clear enough, and as a result, taxpayers here in Massachusetts and elsewhere could end up in trouble with the IRS.
Married couples do enjoy certain advantages when it comes to federal income taxes. The exemptions and deductions are often more, which greatly lowers the taxable income they have. The first tax year afterward may cause some shocking revelations when Massachusetts residents divorce. The way they deal with the IRS changes now that they are newly single.
It can be challenging for Massachusetts residents to know what credits and deductions they can and cannot take at tax time. One credit that the IRS says many people are missing out on is the earned income tax credit. The agency estimates that one out of every five who qualify for this credit fail to take advantage of it.
The deadline for filing federal income tax returns in 2020 is April 15. However, Boston taxpayers do not have to wait that long to file. In fact, getting their tax returns to the IRS early could provide them with some benefits.
Not every college experience works out as Boston residents plan. Any number of things can happen that cause a individual not to complete a degree program at a certain institution. In some cases, any student loans taken out could be discharged by the Department of Education and the IRS may not require the student to count it as taxable income.
Income can be earned in different ways, which means it will be reported in different ways at tax time. For instance, miscellaneous income is reported in boxes 1 through 10 on Form 1099-MISC and must be reported to the IRS. However, Boston taxpayers may actually benefit from the information entered into box 3.
Now that the holidays are over, many Boston residents are looking forward to filing their federal income tax returns in order to get the refund that will pay for their gift purchases and maybe more. Considering the fact that the average refund the IRS sent out for the 2018 tax year was $2,725, it is easy to see why they are excited. However, if they really understood what it means to get a refund, that perspective may change.
Whether a young Massachusetts resident starts a new job, starts college classes or takes some other step into adulthood, it represents a new beginning, and an exciting and pensive time in that person's life. Becoming an adult comes with numerous responsibilities and one of them is paying taxes. The beginning of a new taxpayer's relationship with the IRS can be stressful.