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There’s nothing worse than the feeling of a large and unexpected tax bill! This is why it’s important to proactively make a plan for your taxes. This article helps you understand the ins and outs of your taxes and what to do to avoid surprises, especially unwanted ones. Here are our top ways to avoid a big tax bill in April!
Why did I just get a tax refund?
The IRS gives you a tax refund because you likely overpaid on your income taxes the previous year or qualify for a refundable tax credit such as the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), or premium tax credit (PTC). If you are self employed, you may have overpaid on your estimated taxes. Essentially, the IRS is giving you back money because you gave them too much to begin with by neglecting to account for refundable tax credits, filling out your W-4(s) incorrectly, or simply because you did not add up the money you owe properly.
Why don’t I ever get a tax refund?
2021 in particular is an odd year for tax refunds. Because of the pandemic, Congress passed the American Rescue Plan Act which provided various forms of aid to citizens which is now affecting tax returns. The benefits you received to offset the effects of the pandemic could lower the amount of tax credits you’re entitled to on your refund in 2022.
If you’re not getting a refund on a regular basis, however, there are other things you may not be taking into consideration. Accounting for each job across your W-4s and withholding the proper amount in each paycheck is important because, if done incorrectly, your tax refund could be less than expected. Neglecting to account for eligible tax credits and deductions is also important. For example, if you’re a student of higher education and took advantage of suspended student loan payments, you may have gotten a lower student loan deduction. There are other tax credits you may be eligible for:
Why am I getting a smaller federal tax refund this year?
There are a number of reasons why your federal tax refund could be smaller this year than in previous years. Your income or deductions may have changed, the tax laws may have changed, or a plethora of other possible reasons. Essentially, having a smaller federal tax refund means you didn’t overpay on your taxes.
Why does it take so long to get a tax refund?
If you claimed the EITC or additional CTC on your tax return, your return cannot legally issue refunds prior to mid-February, according to the Protecting Americans from Tax Hikes Act. “The IRS expects most EITC/Additional CTC related refunds to be available in taxpayer bank accounts or debit cards by March 1, if they chose direct deposit and there are no other issues with their tax return.”
Another common reason peoples’ refunds are slower-than-normal may be because their return:
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Do small businesses get tax refunds?
Most small businesses don’t get tax refunds because of their business entity type. Sole proprietors, partnerships, S Corporations, and limited liability companies have what’s known as a pass-through tax, meaning the entities pass their income through to the owners who are then taxed on their individual tax returns. C Corporations, however, are directly eligible for tax refunds because they file their own tax returns and very infrequently elect for pass-through status. In other words, profits from C Corporations are taxed separately from its owners under subchapter C of the IRC.
Will I get a tax refund if I was on unemployment?
In short, no. If you were filing your 2020 return, the answer would have been yes. Unfortunately some of the benefits offered at the onset of the pandemic are no longer available.
Can someone on welfare get a tax refund?
Yes, someone on welfare can get a tax refund. Welfare recipients are entitled to tax refunds if they apply certain tax credits, like the EITC, on their return. As long as the person earned income from employment or self-employment during the year they are eligible for a refund.
People who did not work during the year may be eligible for a tax refund through refundable credits. A refundable tax credit is a tax credit that is refunded to a taxpayer. For example, if you owe $900 and qualify for a $1,200 refundable credit, you would receive a $300 refund.
How do I avoid the gift tax?
“The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The gift tax applies to the transfer by gift of any type of property. You make a gift if you give the property (including money), or the use of income from property, without expecting to receive something of at least equal in return.”
You can avoid the gift tax through a few different avenues:
What should I do to avoid big tax bills? Here are three things you can to do lower your tax bill:
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