Can they make it more complicated? The Internal Revenue Service (IRS) has a knack of making the tax code confusing. This forces many people to rely on a certified public accountant (CPA) to prepare and file their taxes.
1) If I Don’t Make Much Money, Do I Need to File?
This is a question many of the cohort in Generation Z or millennials have. Since most are in school or just starting out, they may not make a lot of money.Depending on your filing status and age, the minimum income, under age 65, to file is $13,850. So, you’re not required to file taxes if you’re under that threshold. But you may want to file anyway.
2) How Do I Know How Much Taxes to Pay If I File an Extension?
Regardless if you file an extension, you‘ll need to pay taxes on time, or you’ll have penalties and interest to pay.You can use the estimated tax worksheet on Form 1040-ES. Use Line 13c as your estimated taxes due/balance owed on your extension as filed on Form 4868.
Use the actual figures you have to complete the form and estimate figures you don’t have. You'll want to use the amount of the tax due on the return as your estimated taxes due. Be sure to replace all estimates with actual figures when you finally file.
3) Are Home Improvements Tax Deductible?
Home improvements are personal expenses and aren’t tax deductible the year they are made. But if you keep receipts for those expenses, they may reduce your taxes in the year you sell your house.Although you can’t deduct that new bathroom or roof, there are energy tax credits.
4) Do I Have to Pay Taxes If I Receive Money Through Venmo or PayPal?
Yes, if you took payment for services or products through Venmo or PayPal, you'll need to pay taxes on it. The IRS requires PayPal and Venmo to send customers a Form-1099 if the income meets the $20,000 threshold for 2023.5) Is a Tax Credit Better Than a Tax Deduction?
Generally, tax credits are deemed to be better than a tax deduction. Your tax liability is directly reduced with a a tax credit.6) Can Medical Expenses Be Deducted?
Unreimbursed medical expenses that exceed 7.5 percent of your adjusted gross income (AGI) can be deducted. Some unreimbursed expenses include:- preventative care
- surgeries
- medical treatments
- dental and vision
- prescription medications
- glasses, false teeth, hearing aids, etc
- psychologist and psychiatrist visits
7) Should I Itemize or Claim a Standard Deduction?
When the Tax Cuts and Jobs Act (TCJA) of 2017 passed, this decision became easier. Under the TCJA, you don’t itemize if the standard deduction saves more money.The TCJA doubled the standard deduction. The standard deduction for 2023 is $13,850 for single and $27,700 for those taxpayers filing jointly. It increases to $14,600 for single and $29,200 for joint filers in 2024.
8) What Does a CPA Do vs. an Accountant?
An accountant has a bachelor’s degree in accounting. A CPA has a degree, additional education, experience, and examination to become certified.An accountant and CPA perform the same functions, but the government recognizes a CPA as someone who is credible and an expert in their field.
Only a CPA can prepare an audited financial statement or file reports with the Securities and Exchange Committee (SEC).
Both CPAs and accountants can represent clients in front of the IRS.