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.
The tax year for most people across the country, including here in Massachusetts, ends on Dec. 31. Some people may think they have run out of time to prevent the IRS from taking even one more dollar than necessary at tax time. Fortunately, there may still be time to take steps to make that happen.
Many Massachusetts residents spend years building their retirement accounts. For those who did so through employment, the funds put into the account received tax-deferred status. That is, until withdrawn. Most people understand that the IRS could penalize them for withdrawing funds too early, but that may not be the only source of potential penalties.
Do those living in the United States, including Massachusetts residents, have to pay federal income taxes if owed? Do they even have to file federal income tax returns at all? Some people would say that the answer to these questions is no. They believe submitting those forms each year and paying taxes is voluntary, but -- and no surprise here -- the IRS does not agree.
Most people who retire do so within a budget. Like numerous others across the country, many Massachusetts residents begin planning for their retirement as soon as they can, but that could be at different stages of their lives, so the budgets will be different. One mistake many people make when doing their planning is how the IRS will treat those precious funds.
With all the changes to the Internal Revenue Code that took effect in the 2018 tax year, it may not surprise Boston residents that more changes could come for 2019. Not all tax breaks survive through to another year, and this year may be no exception. As the country enters the fourth quarter of the year, some people may already be looking to taking advantage of as many tax breaks as possible when they file their returns with the IRS.
After working for decades, many people can begin drawing Social Security benefits. While it would make sense for these benefits not to be taxed, the IRS still classifies them as taxable income. Fortunately, the state of Massachusetts is among 37 states who believe recipients are entitled to keep as much of this money as possible.
Depending on their professions, certain Boston residents may need to keep track of more than one date to pay their taxes. Independent contractors, investors, business owners and those with side jobs may be on a different payment schedule with the IRS. They may need to make quarterly tax payments in order to stay off the agency's radar.
No one should have to put up with sexual harassment. Massachusetts residents who experience this unseemly treatment have the right to lodge a complaint with their employers. In some cases, victims receive financial settlements in exchange for not pursuing the matter any further. What they need to take into consideration is how the IRS treats these types of settlements in order to plan for the tax ramifications.