As many Boston residents start preparing their tax returns, finding out they owe money may come as a surprise. Preparing their returns now could give them the time to save up the money owed, but then again, it may not. Many taxpayers' budgets are stretched enough without adding a tax bill into it. Under those circumstances, they could enter into installment agreements.
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.
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.