Tag: Tax Return

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Five Tips for the 2025 Tax Filing Season

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The IRS just announced that the 2025 tax filing season has officially begun as the IRS is now accepting and processing 2024 individual income tax returns. If you’ve decided to prepare your 2024 income tax return yourself, here are five tips to remember.

Tip #1: File Electronically

Filing your return electronically reduces the chances of errors on your tax return. This is because tax return software will do the arithmetic for you and check for common mistakes many taxpayers make, like missing information.

If you’re worried about the cost of using tax preparation software, the IRS offers IRS Free File. This allows eligible taxpayers to prepare and file their federal returns electronically using guided tax preparation software. You’ll most likely qualify to use this if you have an adjusted gross income (AGI) of $84,000 or less. In California, the threshold for AGI is $244,857.

There’s also Direct File, where taxpayers from 25 states can file their tax returns directly with the IRS for free. You can use Direct File from almost any device, including your computer, smartphone, or tablet. You’ll also have access to live IRS staff, Monday – Friday, from 7 a.m. to 10 p.m. EST.

If you choose to file electronically, it’s also recommended that you select direct deposit to receive your tax refund. Not only is it faster, but it’ll reduce refund check issues, such as getting lost in the mail, going to the wrong address, or being stolen.

Tip #2: Avoid Tax Scams and ID Theft

Taxes are confusing, so tax season is the prime time for scammers and ID thieves to prey on taxpayers who don’t fully understand taxes or the tax preparation process. Here are a few tips to avoid getting scammed or having your identity stolen:

  • If something sounds too good to be true, it probably is.
  • Avoid any tax “professional” who uses threats or pushy and aggressive sales tactics.
  • Be wary of clicking on links sent to you by email or text message.
  • Verify tax advice given by individuals on social media.
  • If you need to pay a tax bill to the IRS, be aware that the IRS won’t accept gift cards or other unusual forms of payment. The IRS will usually accept payment by check, money order, cash (but only through their retail partners), bank wire, electronic funds withdrawal, credit card, debit card, and digital wallet.
  • Don’t give out your date of birth and Social Security number unless necessary and only to trusted entities.

If you believe you might have been targeted (or a victim) for tax ID theft or a tax scam, report it.

Tip #3: Look Out for 1099-K Forms

The IRS has been slowly implementing new rules regarding 1099-K forms. These are tax documents you might receive from online marketplaces and payment service providers, like eBay, Etsy, Venmo, and PayPal. For 2024, the federal reporting threshold for generating a 1099 was $5,000. However, some states have lower thresholds and, therefore, some companies might send you a 1099-K if these lower thresholds apply to you. The IRS does require that all income is reported, even if a 1099-K is not received.

Tip #4: Double-Check Your Tax Documents

If there’s an error with your 1099 or W-2, contact your employer or financial institution to fix it or get clarity on the discrepancy. You need to do this to avoid mistakes or omissions on your tax return, as these could lead to a closer look by the IRS and tax headaches.

Tip #5: Get a Filing Extension if You Need It

Your 2024 income taxes are due on April 15, which is the traditional tax deadline. However, this will sometimes be a day or two later if the 15th falls on a weekend or holiday. If you think you need more time to file your return, you can ask for an extension. This extension will usually provide an extra six months to file your return. Just remember that this extension applies to filing your return, not paying any taxes owed. If you believe you’ll owe taxes for the 2024 tax year, you’ll want to send an estimated tax payment to the IRS along with your extension request.

Need Extra Help with Your Taxes?

If you have a simple tax return, you can probably prepare and file your return on your own. But, if you have questions or want extra peace of mind, contact a professional tax preparer for additional assistance.

Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!

Do Not Ignore Your Tax Problems!

Tax Law is Our Specialty. Contact us to Get Your Life Back to Normal.

Kienitz FeaturedImage What is a W 2

What’s a W-2 Tax Form?

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If you’re like millions of workers, you’re employed as an employee. Assuming this applies to you, you can likely expect to receive an IRS Form W-2 from your employer within the next month or so. This is an important document to help you prepare and file your income tax return due in April. But why is the W-2 so important and is it always required to file your taxes? The goal of this blog post is to address these questions and provide an overview of this ubiquitous tax document.

What is a W-2 Tax Form?

Also known as a Wage and Tax Statement, the W-2 Form is a document that your employer sends you and the IRS that outlines how much compensation you received and how much of that compensation your employer withheld for income and payroll tax purposes.

Do All Workers Receive a W-2?

No, it’s usually only employees that get them. Freelancers and independent contractors will typically get Form 1099 from their client or employer instead. In these situations, the employer won’t normally withhold any of the compensation for taxes. So, it’s up to the independent contractor to pay estimated quarterly taxes to the IRS.

You also need to earn enough compensation before your employer creates a W-2 for you. If you receive $600 or more in cash or noncash payments during the tax year as an employee, only then is your employer legally required to send you a W-2 (and a copy to the IRS).

When Should I Receive My W-2?

Assuming your employer is required to create a W-2, they must send it to you and the IRS by January 31. These can be mailed, but they’re sometimes sent electronically, either by email or made available for downloading from a payroll-related website.

If you don’t get it by the middle of February, you should contact your employer to make sure they sent it and, if so, used the correct email or mailing address.

What if the W-2 is Wrong?

You should contact your employer and have them correct or clarify the information and, if necessary, send you a corrected W-2. If this results in you being unable to file your tax return by the April 15 deadline, you can contact the IRS and ask for an extension.

Alternatively, you can estimate your earnings and tax withholdings yourself, such as by reviewing your pay stubs. You may also need to complete IRS Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (yes, the official name of this form really is that long).

How are W-2 Forms Different from W-4 Forms?

A W-2 summarizes your compensation and taxes. In contrast, IRS Form W-4, Employee’s Withholding Certificate, is something you fill out to give your employer information about your tax filing status. They then use this information to withhold the correct amount of taxes from your paycheck.

What’s IRS Form W-2G?

IRS Form W-2G, Certain Gambling Winnings, is a summary of your reportable gambling winnings that may be subject to income tax. Think of Form W-2G as a W-2 form, except it’s for income that comes from gambling, not your day job.

If your gambling winnings at a casino or other gambling establishment exceed a certain threshold (the exact amount depends on the type of bet you place and how much money you won), then you’ll probably receive Form W-2G the same day you received your gambling winnings. In some cases, you’ll get Form W-2G in late January or early February of the following year (roughly the same time you should be getting your W-2).

Conclusion

In most situations, your W-2 form will be one of the least burdensome of tax documents. When you receive it in February, review it to make sure it’s correct. Then you need to put it in a safe place with your other tax and financial documents until you’re ready to prepare your taxes yourself or hand them over to your tax preparation professional.

Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!

Do Not Ignore Your Tax Problems!

Tax Law is Our Specialty. Contact us to Get Your Life Back to Normal.

Kienitz FeaturedImage Dec. 2024 (1)

End of Year Tax Planning Checklist Guide for 2024

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It’s the holiday season, which means 2025 is just around the corner. Even though you might be focused on spending time with family and friends and ending your work year on a high note, don’t forget that now’s the time to make certain financial decisions. This is particularly true when it comes to taxes. The following is an overview of things you might want to do or think about before the end of 2024.

Item #1: Check Your Flexible Spending Account

If you have a Flexible Spending Account (FSA), and it’s like most others, then the money in the account must be used up by the end of the calendar year. If it’s not, then the money in the account could be lost forever. So, before January, check your FSA to confirm if it’s a “use-it-or-lose-it” type of account. If it is, see if there are healthcare costs you can pay for with FSA funds. If not, you can check to see if your employer provides an option to minimize a loss of funds. While not required, an employer who offers an FSA to its employees may allow employees to either:

  • Provide up to an extra 2.5 months in the following year for the employee to use the FSA funds, or
  • Allow the employee to carry over up to $660 of the FSA’s funds into the following year.

If your FSA allows for either of these options, they can give you extra time (or money) to pay your medical costs.

Item #2: Check Your Tax Deductions

If you’re like most individual taxpayers, you probably take the standard deduction. However, if you’re on the fence about whether to itemize or take the standard deduction, now’s the time to check your likely tax deductions for 2024. One of the things you’ll be looking for is to see if there are any deductions you missed, as well as whether you still have room to increase these deductions before the end of the year.

For instance, assume you want to itemize your deductions. Also, imagine you’ve made eligible charitable cash contributions that amount to 50% of your adjusted gross income (AGI) and the 60% AGI limit applies to you. In this case, you can consider making one or two final cash donations to take full advantage of this itemized deduction.

Item #3: Take Advantage of Your Losses with Tax-Loss Harvesting

If you’ve invested this year, then you probably have both some capital gains and some capital losses. If in line with your overall investing strategy, consider selling some of your losing investments to “lock in” the losses. Then you can use those losses to offset some, or all, of your capital gains. If you have losses left over, you can use some of those losses to offset ordinary income.

Before making use of tax-loss harvesting, be aware of two key things. First, don’t let the desire to save on taxes persuade you to make a poor investment decision. The last thing you want to do is sell a losing stock that was about to rise and become a profitable investment. Second, be aware of the wash sale rule. If you quickly buy back the investment in 2025 after selling it in 2024, the IRS may disallow you from using the capital losses to offset the capital gains.

Item #4: Maximize Your Tax-Advantaged Retirement Contributions to Your 401(k)

If you have a 401(k), see if you’ve made full use of the tax-advantage benefits it offers. You may not have because you simply didn’t have the funds to maximize your contributions. But, if you have extra money sitting around and haven’t hit your 2024 contribution limits, think about making an additional contribution in December. In case you’re wondering, you have until April 15, 2025 to make contributions to your IRA for the 2024 tax year.

Item #5: Consider Consulting with a Tax Planning Professional

Taxes are complicated, so it’s understandable if you don’t fully comprehend what financial decisions are best for you and your taxes. Because of this, consider contacting a tax-planning professional to discuss your available options. They can examine your tax situation and see if you’re missing something (you don’t know what you don’t know) and also help you avoid future tax problems and disputes with the IRS or CA FTB.

Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!

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Is a Tax Credit Better Than a Tax Deduction?

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Whether you’re tax planning or preparing your income tax return, you’ve probably heard about tax credits and deductions. You also probably know that they’re both good to have when it comes to owing less money to the IRS. Let’s take a closer look at both of these tax benefits, including which one is better, how they work, and how they’re different from each other.

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