March 30, 2021 • 32 mins
Hello! and welcome to Everyday Finance and Economics with the Siglers! The podcast where we discuss what you need to know about personal finance and economics and give you practical advice on how to get started and be smart with your money.
This episode is a continuation of our tax episode, where we dive back in and answer listener questions about tax day which is May 17, 2021. We give a quick recap of the basic information we went through last week about how to complete your taxes and what tools you can use to do so, but also go into more specific questions such as what happens if you can't pay, what to do if you get a phone call claiming you owe money to the IRS and more! As always don't be afraid to reach out with any questions by email, and be sure to join us next week when we cover budgeting!
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Speaker 1 (00:11):
Hello, and welcome to everyday finance and economics
with the Sigler's the podcastwhere we discuss what you need
to know about personal financeand economics, and give you
practical advice on how to getstarted and be smart with your
money.
We're your hosts, Glenn andChristina
Speaker 2 (00:26):
Sigler.
So Christina, what's going on inthe economy this week.
Speaker 1 (00:30):
All right.
Here's what matters this week.
Um, the Suez canal is blockedand that is a major problem.
Uh, the Suez canal is a very,very narrow man-made canal that
connects the Mediterranean seaand the red sea.
And that's how 12% of all theworld's shipping gets from
(00:50):
Europe to Asia.
It's a very important waterway,uh, because before that, you had
to go around the Southern tip ofAfrica to get things from Europe
to Asia, and that's just reallynot convenient for anyone.
So it's responsible for aboutthree to$9 billion, billion
dollars worth of goods per day.
And right now it's blocked bythe 1,300 foot, 200,000 metric
(01:16):
ton ship the ever given.
And there's a lot of chipsbacked up in the Suez canal
right now.
And some companies have evendecided to send their ships
around the Cape of good hope, um, around the Southern tip of
Africa, which adds weeks to thejourney and is very, very
expensive.
So this is going to end upraising the prices, at least a
little at, it could be a lotdepending on how long it takes
(01:39):
to ever given to get unstuck.
Because right now they're tryingto like dig and expand the whole
, but it's, it's not, it's avery large ship.
And the economic term of thisepisode is a tax credit.
A tax credit is a tax incentive,which allows certain taxpayers
to subtract the amount of thecredit that they have accrued
(01:59):
from the total that they owe tothe state.
So it was something that letsyou deduct the amount of tax
that you owe, basically.
All right, dad, I think it'stime to get into this week's
topic.
What are we talking about today?
Speaker 2 (02:13):
We're talking about taxes again,
Speaker 1 (02:15):
Really again.
All right.
Well, let's, let's give ourlisteners a little bit of a
recap from last week becauselast week was a lot.
Um, and the first question iswhat are taxes?
The answer, uh, taxes are ourcontributions to fund the
federal and state governmentsfor the services and support
(02:35):
that we require as citizens.
Speaker 2 (02:37):
Yeah, and the process of filing our taxes is simply
when it's simple.
When you think of basics for allof us who are wage and salary
earners, our employers send thegovernment, some of our wages,
each pay period for our taxapplications, completing your
tax forms allows us to calculatehow much we would hae.
(02:58):
We should know in taxes based onour income and living situation.
This allows us to compare whathas already been paid into the
government on our behalf and howmuch we really owe.
If we paid him more than we owe,we get a refund.
If we owe more than it's alreadybeen paid, we have a tax bill
and that's it.
Speaker 1 (03:19):
Okay.
Well, last time we discussed howto complete our taxes.
Can you remind us, can youremind us of that again?
Speaker 2 (03:26):
Okay.
There are three ways to completeyour tax forms.
One is fully manually.
That's the hard way, uh,download your tax forms you need
and instructions go to the IRSwebsite, ww.irs.gov.
Fill them out.
Forms are also available at thepost office public libraries.
This can be hairy for many, butthere are publications and
(03:48):
online resources to help.
Speaker 1 (03:50):
And our podcasts, our podcasts is also one of those
resources and this, this optionis free.
Let's just not forget to mentionthat that is true.
Speaker 2 (04:00):
Uh, software, software, or online filing
tools, terrible tax H and Rblock tax act, tax layer.
Jackson Hewitt are among themany tools that can be used to
complete your taxes.
These tools typically walk youthrough the forms in an
interview slash questionnaireapproach, uh, and it even
includes additional guidance andthe details of the rules within
(04:24):
the software online tool to helpyou the last and probably the
easiest method for everybody isjust gather all your stuff and
hand it off to a taxprofessional.
Um, you're, you're gonna spendyour time just gathering your
information, but then afterthat, your interview with the,
with the individual about your,your living situation allows you
(04:45):
to rest at ease because someonewho does taxes for a living is
now completing your taxes.
Those, the options go from theleast expensive to the most
expensive, right.
Uh, but there are even some freeoptions.
And if you've got simple, simplesituations, uh, you can even
file online.
Speaker 1 (05:04):
Yeah.
Okay.
So what are the tax forms likeactually, like what is it like
to fill one out?
Is it just like a questionnaireor what,
Speaker 2 (05:12):
Yeah.
If you're completing your taxesmanually or through the software
, uh, online, um, it's similarto compete, completing a
questionnaire each year.
The first section is yourpersonal information, your name,
where you live, so securitynumber, single filing status and
things of that nature.
Uh, the second section is whereyou input, uh, your, all your
(05:35):
income data, uh, W2 from eachjunk company.
You, you work for, uh, 10 90nines, financial statements from
your investments, uh, activitiesand for your bank accounts, uh,
after that, you're going to putin your deductions, whether
you're, uh, whether you're goingto stand, use the standard
deduction, or you're an itemizeddeduction that comes in here
(05:58):
this year from, for, for thevast majority of people, Oh,
you're gonna use the standarddeduction.
Um, roughly 85 to 90% of allpeople use the standard
deduction for single individualsis 12,404 married folks filing
jointly it's 24,800.
The sum of your income, lessyour deductions results in your
(06:22):
taxable income,
Speaker 1 (06:23):
Less means minus yes, it's attractive.
Speaker 2 (06:26):
Yes.
Tax software calculatecalculates this stuff
automatically manual paperfilers.
You're going to have to do somemath.
You bring a calculator and thereare also tax tables and
schedules within the, within theinstructions to help you.
If you're doing it manually,
Speaker 1 (06:42):
It's helpful chart.
All right,
Speaker 2 (06:44):
After that comes identification of any tax
credits for which you qualify.
And that, that takes a littlebit of research because there's
a lot of different tax credits.
Uh, so you know, you'll have toread through, uh, and research
whether you qualify for thoseitems, some of the more popular
ones we'll discuss a little bitlater.
(07:05):
Um, remember tax credits aredirect reductions of the amount
of taxes you will.
So if it said you owed$5,000 intaxes and you have a$600 credit,
your tax gets reduced by$600.
Okay.
Okay.
After, after that, it's justmath.
How much has already been paidin through withholding versus
(07:28):
how much
Speaker 1 (07:30):
From like your paycheck, right.
Speaker 2 (07:31):
That's exactly right.
Okay.
And so we, when you do thatcomparison, you've either had,
you know, more money withheld.
So you get a refund or you'vehad less money withheld and you
have to pay the IRS a little
Speaker 1 (07:45):
Bit of money.
It's never exactly right.
Is it,
Speaker 2 (07:49):
Um, you know, for, for most people it's never
exactly right on, but you wantto be, you want to be close
that, that that's you, that'syour goal to be, uh, close.
Most people, um, have morewithheld than tack, then they're
going to owe in taxes and, and,uh, you know, okay.
So you're, you're not going toget a surprise, a bad surprise,
(08:11):
but the question that you haveto ask yourself is why are you
having that much withheldbecause it's an interest free
loan to the federal government.
And so you, you want that to be,uh, close.
Speaker 1 (08:24):
Yeah.
Yeah.
And this is just a reminder,everybody, that tax day for 2021
for taxes for the previous yearof 2020 is on May 17th.
This year.
It is not April 15th.
Like it normally is, it is notMay 17th.
So your taxes are due May 17ththis year.
Uh, what resources are availableto help if I get stuck or need
(08:45):
more information.
Okay.
Speaker 2 (08:47):
Okay.
There are a lot of resourcesavailable for help.
Again, online ww.irs.gov.
You can, the IRS now that said,yes, yes, you can.
That's that said there are in a,there can be some very long wait
times when you try to call IRSduring tax.
Speaker 1 (09:06):
Yeah.
That's a long automated system.
Right.
Speaker 2 (09:09):
You can talk to folks and, and you can't get real-life
folks to help you.
Um, additionally tax calculatorsare available, as I said before,
online from, you know, various,uh, some, some of the various
software providers, um, and alsoembedded in those tools, uh,
(09:30):
are, are things that can answerquestions or even get you in
touch with a tax professionalthrough the software.
Um, and then of course there'salways YouTube.
Yep.
Um, there are literally dozensof, of YouTube videos out there
(09:50):
to help folks walk through someof these tax forms.
Probably more than thatprobably, but I couldn't look at
all.
So I just took a look at a fewof them.
Um, and, and they, you know,they do a good job of walking
you through, um, walking youthrough the forms.
You gotta find one that, thatspeaks to you.
(10:11):
That's teaching you the, the,this forms in a way that you can
understand that, but that that'salso a resource that's available
and there's volunteers out thereas well.
Speaker 1 (10:23):
Okay.
Done with everything that isdeemed as mandatory.
There's that one eternalquestion, which is, do I have to
do I have to file,
Speaker 2 (10:35):
Um, in general, if you, if you make less than
$12,400 in salary and wages peryear, per year for, for 2020,
you don't have to, um, nowthat's going to leave money on
the table, you know, because ifyou are, if you earn less than
(10:58):
that amount of money, you wouldlikely get virtually all of that
money back in refunds.
And so that's, you know, that'sreally one of the reasons you
want to, uh, file your tax.
Speaker 1 (11:14):
Okay.
So why does the IRS have us filebasic income tax information
when they know how much we make,um, I get it for people with
like complex tax returns, butnot for just a normal income
tax.
Why can't they just send me arefund or a tax bill?
Speaker 2 (11:32):
And so-so th th there's a lot of truths in that.
So, uh, employers are requiredto send in your information when
they send, uh, you know, whenthey send you your tax
information, they're alsosending the IRS, your tax
information to the IRS canreally figure out how much you
earned in salary wages, but theymay not be fully aware of the
(11:57):
life situations that create, uh,changes in our taxes, changes,
marital status, job, status,living situation, birth of kids,
charitable deductions, and manymore all impact our tax
situation.
You as the filer have a vestedinterest to make sure that those
things are up to date so thatyou can minimize the tax that
(12:20):
you owe.
Because if the IRS, uh, you know, does that for you, you might
not like the results.
They might not include all thethings that, uh, would benefit
you in terms of minimizing yourtaxes.
So you don't have to do it, butyou have a vested interest to do
(12:42):
it.
This is your opportunity to gethere.
Speaker 1 (12:45):
Okay.
Uh, who shouldn't file fortaxes?
Speaker 2 (12:50):
So that's an interesting question.
Who should,
Speaker 1 (12:53):
Yeah, because I feel like, well, for me, I shouldn't
file for taxes cause I don'tmake any money, but
Speaker 2 (12:59):
All right.
So that is, um, if you make lessthan 12,400 per year, um,
without other sources of incomefrom training or investments,
you may want to consider notfiling notice.
I said, consider example, ifyou're single and earned only
(13:21):
$6,000 a year, and you get a W2that indicates, uh, only$25 with
were withheld from your income,you might want to consider if
it's worth your time for file atax form to get back 25.
Speaker 1 (13:38):
Yeah, yeah, yeah.
Speaker 2 (13:41):
And so, but each individual has to answer that
question.
Uh, would you file a taxes ifthe, if$50 were withheld or$150
or 300 were, where, where wouldyou file Christine?
Speaker 1 (13:58):
To me, any money at this point is money that I need.
Um, it's the college studentmentality, but I, it really
just, I guess what you're sayingis it matters like how much the
money on the table means to you,right?
Like how much do you need itversus how much do you need your
time back?
Right.
And value of money.
Speaker 2 (14:18):
Right.
Well, th that is true.
Yeah.
But by not filing, you'reessentially gifting this money
to the IRS and federalgovernment.
The time trade off might beworth it to you.
Um, and so that's the biggerthing that you have to consider
ma'am as I said before, um, youknow, if there are such, there
(14:39):
might be situations where, uh,the IRS may think, Hey, you made
more money than, than$12,400last year.
Um, so we think you owe a lotmore taxes.
If you file your taxes, youyou're putting on the record.
Here's how much money I madefrom all my sources.
And, and, and that, you know,essentially reduces that up, you
(15:02):
know, reduces that, uh,possibility of the IRS saying,
Hey, you owe a whole lot more.
Speaker 1 (15:10):
Okay.
So what do I need to file fortaxes?
Speaker 2 (15:15):
Okay.
So we talked about this the lasttime, a little bit, but we'll
recap, quick repo, personalidentification, information,
name, social security number,address, filing status, your
income information, salary, andwages from all your W2's from
all your workplaces bank orfinancial institution
statements, including gains andlosses from any trading
(15:36):
activities you had, uh,miscellaneous information,
income information, all yourform, 10 90 nines, and 10 98, 10
90 eights are things for collegestudents.
Hey, you, you went to college 1098.
Sometimes your parents might beusing that instead of you.
Um, and, and the anyself-employment information.
Did you do any gig work
Speaker 1 (15:58):
And stuff like that?
Do you use them 10 98?
Uh, Oh, wait, I sent it to you.
Yeah.
Speaker 2 (16:03):
Yes.
You did send me your 10 98.
I have your 10 98.
Speaker 1 (16:07):
So that must be for dad.
Speaker 2 (16:10):
Now, if you itemize, you might, you need, uh, you
know, some additionalinformation.
So medical expenses, informationon medical expenses, charitable
nature donations and cash andgoods, uh, home ownership
information.
Did you pay property tax onyour, on your house?
Was there any mortgage intereston your, uh, on your house and
(16:32):
then any state taxes that youpaid, um, you know, sales or
income tax property, uh,property taxes.
Um, and then of course you'regonna need the tax forms.
So, uh, th th th that, that in anutshell are the things that
would, um, uh, would be neededby the majority of the folks.
(16:53):
And if you've got more complextax situations, you're obviously
going to need some, someadditional information.
Speaker 1 (16:58):
Wait, sales talks like receipts for buying stuff.
Speaker 2 (17:01):
Uh, you can do it that way.
You, you, you, there, there'sactually a couple of ways to do
it.
You can actually sum up thesales tax from everything that
you bought.
Speaker 1 (17:12):
Oh, so every single receipt I need to say,
[inaudible],
Speaker 2 (17:16):
That's one way to do it, but there, but there are
also, the IRS has calculatorsthat say, okay, if you made this
much money, you probably spent,you've probably spent this much
in the sales tax would be this.
Speaker 1 (17:31):
Did you ever do the safer seat methadone?
I have not done that yet.
It seems.
That seems like too much.
Every single time I bought food.
Speaker 2 (17:39):
Yeah.
Now, so I'm not doing that, butthere are, um, if you buy big
ticket items there, there'sessentially a blended method.
You can say, I spent all thismoney on these big ticket items
and then the rest, you know,
Speaker 1 (17:56):
Estimate.
Yeah.
So like you bought a Maserati.
No, I did not.
Well, I mean, but that has a lotof sales tax though.
Speaker 2 (18:05):
I'm sure it does, but I would not know.
Speaker 1 (18:08):
I was just, it was just an example.
Yeah.
Your mom would shoot me.
I wonder what yeah.
Don't ever do that.
Um, anyway, so let's move on toa subject that I think we all
can relate to.
I've gotten calls from the IRSand I don't even, I was when I
was a minor.
So if I get a call from the IRS,claiming that I owe money to the
(18:33):
IRS, what do I do?
Speaker 2 (18:35):
So, first of all, I'm going to clarify that statement.
Speaker 1 (18:40):
It wasn't from the IRS, I got a call from a scam.
It was a scam.
Let's just, if you get a callfrom the IRS, the IRS is not
calling you.
Let's just make that.
Speaker 2 (18:49):
Yeah.
Yeah.
Unfortunately, there are a lotof fraud attempts during taxis.
The IRS does not call IRS.
If they're notifying ataxpayers, you're going to get a
notification via the mail.
Not text, not email, not phone,not social media, no mail.
(19:12):
If you receive a call or amessage claiming that you have
to urgently respond for debtcollection or that they're, you
know, they're going to be somehorrible consequences, uh, to
you for that, right?
Don't give them yourinformation.
Speaker 1 (19:29):
Don't click on any links.
Don't click on it.
Speaker 2 (19:33):
Um, you know, get off the phone with they're on the
phone.
If you're on the
Speaker 1 (19:37):
Phone with them, hang up,
Speaker 2 (19:39):
Hang up, report them, report them to that phone
number.
Do not give out your socialsecurity number.
Do not give out any otherdetails.
You're better off just notanswering
Speaker 1 (19:52):
The IRS has your address, or they will go through
the cause.
Think about it.
The postal service is like aUnited States, federal
government institution.
Well, so that's official.
That's official.
Speaker 2 (20:05):
Well, look, that that is the method that the IRS uses
to contact.
Uh, um, they, they have, theywant to have a notice, uh, an
official notification record andyou can trace that through
Speaker 1 (20:21):
The mail.
Yep.
All right.
So what are some types of taxcredits?
We talked about this a littlebit earlier, but let's, let's
really get into it.
Speaker 2 (20:30):
So again, as you said it before tax credit reduced the
amount of tax you owe dollar fordoubt, and you may qualify for
specific tax credits based onyour situation and income level.
And there are three in general,there are three types of tax
credits.
They're non-refundable taxcredits, which can reduce the
(20:53):
tax that you owe to zero, butwill not allow you to get money
back.
And then there's a partiallyrefundable which can provide a
refund for some portion of thetax credit.
If you meet all thequalifications.
So it may say, Hey, we can read,we can reduce your income$2,500,
(21:17):
or excuse me, not reduce yourincome, reduce your tax$2,500.
But if you have zero tax thatthe credit is, you know, a
thousand, so you can only get athousand dollars back.
And then there are fully refundfundable.
Those that error enable a refundof the full amount of the
(21:37):
credit.
If your situation warrants, someof the more popular tax credits
out there, the recovery rebatecredit, which is in effect now,
um, uh, part of the, uh,American recovery plan.
And, you know, there was taxcredit, there's a tax credit.
If you haven't received, um,monies from the stimulus package
(22:02):
in January and March, you canclaim a tax credit and actually
get your money back, or, youknow, it'll either reduce your
tax or it can provide you with,uh,
Speaker 1 (22:15):
Oh, that was, yeah.
That was a big problem.
Cause like some people goteither the first check and
didn't get the second one ordidn't get any checks, although
they qualified.
So yeah, that's what you shoulddo.
Will it, will it do both thechecks or just one?
Speaker 2 (22:27):
Okay.
I think it will do both.
Um, but you know, from what I amreading people are typically
only having problems with one orthe other map, not both.
Okay.
But you know, there are a lot ofdifferent situations out there.
Um, so some other tax creditsthat are popular earned income
tax credits, if you haveextremely low wages while
(22:49):
working full time, and incertain situations you can get
earned income tax credits, childtax credits, childcare, or
dependent care tax credits,saver, tax credits to encourage
people to save for retirement.
Um, um, if even if they have lowincome, uh, energy saving
(23:09):
credits to build, you know, toget people to, um, invest in, in
green, uh, solar panels and allsorts of things that improve the
energy efficiency of their home,you can get a tax credit for
that, you know, uh, and also taxcredits for senior citizens, uh,
and foreign tax credit.
(23:31):
So if you pay tax, if, if youmake some money that from, from,
from an international, um, um,source, sometimes you have to
pay taxes to that country.
And so your us income tax canget a credit of the amount of
tax that you paid to another.
Speaker 1 (23:54):
Oh, that's nice.
Okay.
Um, what are deductions again?
We talked about this a littlebit last time.
Speaker 2 (24:02):
So taxes re uh, tax credits reduce the amount of tax
you owe dollar for dollar taxdeductions, reduce the amount of
gross income that you have thatwill reduce the amount that is
taxable.
Okay.
(24:23):
You know, most people, as I saidbefore, most people use the
standard deduction, which justrequires you to say, Hey, I want
to use the standard deduction.
You don't have to documentanything.
You just say out, I want to useit.
And you qualify for that.
Okay.
And again, if you have expensesin favorite categories that
exceed the value of the standarddeduction, you should itemize,
Speaker 1 (24:47):
Okay.
So what expense items qualifyfor deductions
Speaker 2 (24:52):
And, and just like tax credits where there's lots
of them.
There are lots of expenses thatqualify for deductions for
deductions.
Some of the most popular arestudent loan interest
deductions.
So college students should beaware of that charitable
donation, uh, deductions forcash and goods, mortgage
(25:12):
interest, medical expenses,state, and local, uh, tax
expenses.
If you're, if you go intoeducation, educator, expense,
deductions, health savings,account deductions, uh, even
deductions for contributions toyour 401k.
Speaker 1 (25:31):
Huh.
Okay.
Speaker 2 (25:33):
There are often limitations or special
qualifications that you mustmeet to qualify for some of
these deductions.
Um, for example, an IRAdeduction, well, not, not just
prove it.
You have to meet thesesituations to qualify, to be
able to take it.
So for an IRA deduction, youhave to work at a place that
(25:57):
doesn't have a 401k.
So if, if the place that youwork has a 401k, which is a
retirement plan, then you can'tuse the IRA deduction.
Speaker 1 (26:12):
Okay.
All right.
How much does it cost to dotaxes and are there free
services?
Well,
Speaker 2 (26:20):
For most of us, the complexity of our tax situation
will drive costs, doing yourtaxes yourself as free software
and online tools, uh, from themajor providers can provide, uh,
can, uh, have, uh, a variationin the price range, free version
.
So there are free versions, butthey are at those simplest, um,
(26:46):
least complex tax situations,uh, that w w two wage earners
standard deduction.
Yeah.
That, that can be free.
Uh, but most of the software nowstarts at about$45 range in
retail, but can go over
Speaker 1 (27:04):
A hundred bucks per year, 40
Speaker 2 (27:06):
And$45, uh, yes.
For that year, for, for thatyears now you might get more
than one use out of it.
Uh, so, you know, if I boughtit, then I could use it for
mine.
I could use it for yours ifyou're filing independently.
Um, and, and that would work.
Okay.
Oh, I forgot tax prepares taxprepares for simple type of
(27:31):
situations.
They can be in the 50 a hundred.
Well, it's going to depend onthe locale.
They can.
And so, but that's going to bethe most expensive.
Um, and, and typically folkswith more complex situations,
we'll, we'll venture off into,into that arena where it can
actually go into the thousandsof dollars.
(27:53):
But for, for, again, for mostpeople, even with simple, uh,
simple, um, tax situation, it,it won't cost that much more
than the, um, software.
Okay.
Because I'm just going to giveyou a secret, they use software
to,
Speaker 1 (28:08):
Oh, they have to have people out of business.
Speaker 2 (28:14):
They have, they have, you know, some different songs.
Speaker 1 (28:18):
Yeah.
They have professional gradesoftware.
Okay.
Uh, do I have to file statetaxes
Speaker 2 (28:23):
And that answer's going to depend on your state?
Cause not all States have incometax requirements, uh, Florida
doesn't um, um, and in lots ofStates that, that don't, uh, so
you're going to have to checkwith your, uh, your home state
of record to find out what therequirements are.
Speaker 1 (28:44):
Okay.
Uh, what if I work in one statethough, and live in another, do
I have to file two statereturns?
Speaker 2 (28:51):
Okay.
So now, now you're trying to getcomplicated on that.
Typically you're going to berequired to pay tax on the
income that you earn in eachstate.
So let's say I live inTennessee, but I earned my money
(29:11):
in Mississippi.
Well, if Mississippi has a stateincome tax, well, I'm going to
be required to pay something in,in, in Mississippi, um, States
that are on borders, whereeverybody pays tax, they work
out arrangements where, allright, if you earned the money
(29:33):
in one state, um, you don't haveto pay the tax twice there,
again, like it like the foreigntax credit.
It's sorta like a tax credit forpaying your taxes, Mississippi
then, and Tennessee, I wouldn'thave to, um, uh, pay, uh, the
tax.
Speaker 1 (29:50):
So like you live in Jersey, you work in New York
city.
Yeah.
You're paying tax for New Yorkor New York.
Well, they may have anarrangement, have arrangement
Speaker 2 (30:00):
Where you you're going to pay some tax to
Speaker 1 (30:03):
Jersey, both.
Okay.
So in that case,
Speaker 2 (30:06):
You're going to get it.
It could be, uh, a portion, butyou, again, now you got to go,
those are state specific
Speaker 1 (30:17):
50 different rules.
Uh, what happens though?
If I don't file my taxes.
Okay.
Speaker 2 (30:23):
Right.
If you're due a refund, the IRSwill just keep them out that you
were
Speaker 1 (30:27):
For two, three donation to the government.
Speaker 2 (30:30):
You have three years from the original expected
filing date to filing claim.
Any refunds after that time,period, you forfeit any refunds.
Yet.
If you owe the IRS, they willcalculate how much they think
you.
Speaker 1 (30:48):
Right.
Right, right.
Remember by mail, by mail, bymail.
They're not calling you for it,
Speaker 2 (30:55):
But this will include any penalties and interest on
the unpaid tax bill.
And if you ignore this, thepenalty and interest charges can
easily outweigh the original tax
Speaker 1 (31:06):
And they can come get that.
The statute of limitations onthat does not expire.
So we'll just say that.
Yes, that's correct.
And what happens if I can't paythe entire amount?
Speaker 2 (31:19):
Um, if you find that you don't have the resources to
pay the, uh, the entire amount,you can contact the IRS and work
out a payment plan.
They can work with you to createa monthly payment and it'll
include some interests.
And, uh, from my research, theirinterest is usually less than,
than loans or credit cardinterests
Speaker 1 (31:42):
Because you, right.
Speaker 2 (31:44):
And for the record, you can actually put your, um,
there are ways to put your tax,uh, payments on your credit
card.
And some people do that, but ifyou, Oh, you know, and it's a
significant amount and, and, andyou don't have the money to pay
it, you can work out a monthlypayment plan with the IRS.
(32:05):
And it's always better if youcontact them first.
Speaker 1 (32:08):
Yeah.
Don't wait, don't make them sendyou again a piece of mail
because that's how they'recontacting you.
All right.
Well,
Speaker 2 (32:17):
I don't think there's any more questions.
Speaker 1 (32:20):
No, that's it.
Speaker 2 (32:22):
So that's it for our show.
I want to thank you all so muchfor listening.
And, uh, I'm looking forward toyou joining us again, where we
will discuss.
Speaker 1 (32:31):
Yes.
And if you have any questions atall, for us, you can email
us@efespodcastatgmail.com andfollow our Instagram at E F E S
podcast on Instagram.
Thank you so much for listening.
Take care, everybody.
Hello, and welcome to everyday finance and economics
with the Sigler's the podcastwhere we discuss what you need
to know about personal financeand economics, and give you
practical advice on how to getstarted and be smart with your
money.
We're your hosts, Glenn andChristina
Speaker 2 (00:26):
Sigler.
So Christina, what's going on inthe economy this week.
Speaker 1 (00:30):
All right.
Here's what matters this week.
Um, the Suez canal is blockedand that is a major problem.
Uh, the Suez canal is a very,very narrow man-made canal that
connects the Mediterranean seaand the red sea.
And that's how 12% of all theworld's shipping gets from
(00:50):
Europe to Asia.
It's a very important waterway,uh, because before that, you had
to go around the Southern tip ofAfrica to get things from Europe
to Asia, and that's just reallynot convenient for anyone.
So it's responsible for aboutthree to$9 billion, billion
dollars worth of goods per day.
And right now it's blocked bythe 1,300 foot, 200,000 metric
(01:16):
ton ship the ever given.
And there's a lot of chipsbacked up in the Suez canal
right now.
And some companies have evendecided to send their ships
around the Cape of good hope, um, around the Southern tip of
Africa, which adds weeks to thejourney and is very, very
expensive.
So this is going to end upraising the prices, at least a
little at, it could be a lotdepending on how long it takes
(01:39):
to ever given to get unstuck.
Because right now they're tryingto like dig and expand the whole
, but it's, it's not, it's avery large ship.
And the economic term of thisepisode is a tax credit.
A tax credit is a tax incentive,which allows certain taxpayers
to subtract the amount of thecredit that they have accrued
(01:59):
from the total that they owe tothe state.
So it was something that letsyou deduct the amount of tax
that you owe, basically.
All right, dad, I think it'stime to get into this week's
topic.
What are we talking about today?
Speaker 2 (02:13):
We're talking about taxes again,
Speaker 1 (02:15):
Really again.
All right.
Well, let's, let's give ourlisteners a little bit of a
recap from last week becauselast week was a lot.
Um, and the first question iswhat are taxes?
The answer, uh, taxes are ourcontributions to fund the
federal and state governmentsfor the services and support
(02:35):
that we require as citizens.
Speaker 2 (02:37):
Yeah, and the process of filing our taxes is simply
when it's simple.
When you think of basics for allof us who are wage and salary
earners, our employers send thegovernment, some of our wages,
each pay period for our taxapplications, completing your
tax forms allows us to calculatehow much we would hae.
(02:58):
We should know in taxes based onour income and living situation.
This allows us to compare whathas already been paid into the
government on our behalf and howmuch we really owe.
If we paid him more than we owe,we get a refund.
If we owe more than it's alreadybeen paid, we have a tax bill
and that's it.
Speaker 1 (03:19):
Okay.
Well, last time we discussed howto complete our taxes.
Can you remind us, can youremind us of that again?
Speaker 2 (03:26):
Okay.
There are three ways to completeyour tax forms.
One is fully manually.
That's the hard way, uh,download your tax forms you need
and instructions go to the IRSwebsite, ww.irs.gov.
Fill them out.
Forms are also available at thepost office public libraries.
This can be hairy for many, butthere are publications and
(03:48):
online resources to help.
Speaker 1 (03:50):
And our podcasts, our podcasts is also one of those
resources and this, this optionis free.
Let's just not forget to mentionthat that is true.
Speaker 2 (04:00):
Uh, software, software, or online filing
tools, terrible tax H and Rblock tax act, tax layer.
Jackson Hewitt are among themany tools that can be used to
complete your taxes.
These tools typically walk youthrough the forms in an
interview slash questionnaireapproach, uh, and it even
includes additional guidance andthe details of the rules within
(04:24):
the software online tool to helpyou the last and probably the
easiest method for everybody isjust gather all your stuff and
hand it off to a taxprofessional.
Um, you're, you're gonna spendyour time just gathering your
information, but then afterthat, your interview with the,
with the individual about your,your living situation allows you
(04:45):
to rest at ease because someonewho does taxes for a living is
now completing your taxes.
Those, the options go from theleast expensive to the most
expensive, right.
Uh, but there are even some freeoptions.
And if you've got simple, simplesituations, uh, you can even
file online.
Speaker 1 (05:04):
Yeah.
Okay.
So what are the tax forms likeactually, like what is it like
to fill one out?
Is it just like a questionnaireor what,
Speaker 2 (05:12):
Yeah.
If you're completing your taxesmanually or through the software
, uh, online, um, it's similarto compete, completing a
questionnaire each year.
The first section is yourpersonal information, your name,
where you live, so securitynumber, single filing status and
things of that nature.
Uh, the second section is whereyou input, uh, your, all your
(05:35):
income data, uh, W2 from eachjunk company.
You, you work for, uh, 10 90nines, financial statements from
your investments, uh, activitiesand for your bank accounts, uh,
after that, you're going to putin your deductions, whether
you're, uh, whether you're goingto stand, use the standard
deduction, or you're an itemizeddeduction that comes in here
(05:58):
this year from, for, for thevast majority of people, Oh,
you're gonna use the standarddeduction.
Um, roughly 85 to 90% of allpeople use the standard
deduction for single individualsis 12,404 married folks filing
jointly it's 24,800.
The sum of your income, lessyour deductions results in your
(06:22):
taxable income,
Speaker 1 (06:23):
Less means minus yes, it's attractive.
Speaker 2 (06:26):
Yes.
Tax software calculatecalculates this stuff
automatically manual paperfilers.
You're going to have to do somemath.
You bring a calculator and thereare also tax tables and
schedules within the, within theinstructions to help you.
If you're doing it manually,
Speaker 1 (06:42):
It's helpful chart.
All right,
Speaker 2 (06:44):
After that comes identification of any tax
credits for which you qualify.
And that, that takes a littlebit of research because there's
a lot of different tax credits.
Uh, so you know, you'll have toread through, uh, and research
whether you qualify for thoseitems, some of the more popular
ones we'll discuss a little bitlater.
(07:05):
Um, remember tax credits aredirect reductions of the amount
of taxes you will.
So if it said you owed$5,000 intaxes and you have a$600 credit,
your tax gets reduced by$600.
Okay.
Okay.
After, after that, it's justmath.
How much has already been paidin through withholding versus
(07:28):
how much
Speaker 1 (07:30):
From like your paycheck, right.
Speaker 2 (07:31):
That's exactly right.
Okay.
And so we, when you do thatcomparison, you've either had,
you know, more money withheld.
So you get a refund or you'vehad less money withheld and you
have to pay the IRS a little
Speaker 1 (07:45):
Bit of money.
It's never exactly right.
Is it,
Speaker 2 (07:49):
Um, you know, for, for most people it's never
exactly right on, but you wantto be, you want to be close
that, that that's you, that'syour goal to be, uh, close.
Most people, um, have morewithheld than tack, then they're
going to owe in taxes and, and,uh, you know, okay.
So you're, you're not going toget a surprise, a bad surprise,
(08:11):
but the question that you haveto ask yourself is why are you
having that much withheldbecause it's an interest free
loan to the federal government.
And so you, you want that to be,uh, close.
Speaker 1 (08:24):
Yeah.
Yeah.
And this is just a reminder,everybody, that tax day for 2021
for taxes for the previous yearof 2020 is on May 17th.
This year.
It is not April 15th.
Like it normally is, it is notMay 17th.
So your taxes are due May 17ththis year.
Uh, what resources are availableto help if I get stuck or need
(08:45):
more information.
Okay.
Speaker 2 (08:47):
Okay.
There are a lot of resourcesavailable for help.
Again, online ww.irs.gov.
You can, the IRS now that said,yes, yes, you can.
That's that said there are in a,there can be some very long wait
times when you try to call IRSduring tax.
Speaker 1 (09:06):
Yeah.
That's a long automated system.
Right.
Speaker 2 (09:09):
You can talk to folks and, and you can't get real-life
folks to help you.
Um, additionally tax calculatorsare available, as I said before,
online from, you know, various,uh, some, some of the various
software providers, um, and alsoembedded in those tools, uh,
(09:30):
are, are things that can answerquestions or even get you in
touch with a tax professionalthrough the software.
Um, and then of course there'salways YouTube.
Yep.
Um, there are literally dozensof, of YouTube videos out there
(09:50):
to help folks walk through someof these tax forms.
Probably more than thatprobably, but I couldn't look at
all.
So I just took a look at a fewof them.
Um, and, and they, you know,they do a good job of walking
you through, um, walking youthrough the forms.
You gotta find one that, thatspeaks to you.
(10:11):
That's teaching you the, the,this forms in a way that you can
understand that, but that that'salso a resource that's available
and there's volunteers out thereas well.
Speaker 1 (10:23):
Okay.
Done with everything that isdeemed as mandatory.
There's that one eternalquestion, which is, do I have to
do I have to file,
Speaker 2 (10:35):
Um, in general, if you, if you make less than
$12,400 in salary and wages peryear, per year for, for 2020,
you don't have to, um, nowthat's going to leave money on
the table, you know, because ifyou are, if you earn less than
(10:58):
that amount of money, you wouldlikely get virtually all of that
money back in refunds.
And so that's, you know, that'sreally one of the reasons you
want to, uh, file your tax.
Speaker 1 (11:14):
Okay.
So why does the IRS have us filebasic income tax information
when they know how much we make,um, I get it for people with
like complex tax returns, butnot for just a normal income
tax.
Why can't they just send me arefund or a tax bill?
Speaker 2 (11:32):
And so-so th th there's a lot of truths in that.
So, uh, employers are requiredto send in your information when
they send, uh, you know, whenthey send you your tax
information, they're alsosending the IRS, your tax
information to the IRS canreally figure out how much you
earned in salary wages, but theymay not be fully aware of the
(11:57):
life situations that create, uh,changes in our taxes, changes,
marital status, job, status,living situation, birth of kids,
charitable deductions, and manymore all impact our tax
situation.
You as the filer have a vestedinterest to make sure that those
things are up to date so thatyou can minimize the tax that
(12:20):
you owe.
Because if the IRS, uh, you know, does that for you, you might
not like the results.
They might not include all thethings that, uh, would benefit
you in terms of minimizing yourtaxes.
So you don't have to do it, butyou have a vested interest to do
(12:42):
it.
This is your opportunity to gethere.
Speaker 1 (12:45):
Okay.
Uh, who shouldn't file fortaxes?
Speaker 2 (12:50):
So that's an interesting question.
Who should,
Speaker 1 (12:53):
Yeah, because I feel like, well, for me, I shouldn't
file for taxes cause I don'tmake any money, but
Speaker 2 (12:59):
All right.
So that is, um, if you make lessthan 12,400 per year, um,
without other sources of incomefrom training or investments,
you may want to consider notfiling notice.
I said, consider example, ifyou're single and earned only
(13:21):
$6,000 a year, and you get a W2that indicates, uh, only$25 with
were withheld from your income,you might want to consider if
it's worth your time for file atax form to get back 25.
Speaker 1 (13:38):
Yeah, yeah, yeah.
Speaker 2 (13:41):
And so, but each individual has to answer that
question.
Uh, would you file a taxes ifthe, if$50 were withheld or$150
or 300 were, where, where wouldyou file Christine?
Speaker 1 (13:58):
To me, any money at this point is money that I need.
Um, it's the college studentmentality, but I, it really
just, I guess what you're sayingis it matters like how much the
money on the table means to you,right?
Like how much do you need itversus how much do you need your
time back?
Right.
And value of money.
Speaker 2 (14:18):
Right.
Well, th that is true.
Yeah.
But by not filing, you'reessentially gifting this money
to the IRS and federalgovernment.
The time trade off might beworth it to you.
Um, and so that's the biggerthing that you have to consider
ma'am as I said before, um, youknow, if there are such, there
(14:39):
might be situations where, uh,the IRS may think, Hey, you made
more money than, than$12,400last year.
Um, so we think you owe a lotmore taxes.
If you file your taxes, youyou're putting on the record.
Here's how much money I madefrom all my sources.
And, and, and that, you know,essentially reduces that up, you
(15:02):
know, reduces that, uh,possibility of the IRS saying,
Hey, you owe a whole lot more.
Speaker 1 (15:10):
Okay.
So what do I need to file fortaxes?
Speaker 2 (15:15):
Okay.
So we talked about this the lasttime, a little bit, but we'll
recap, quick repo, personalidentification, information,
name, social security number,address, filing status, your
income information, salary, andwages from all your W2's from
all your workplaces bank orfinancial institution
statements, including gains andlosses from any trading
(15:36):
activities you had, uh,miscellaneous information,
income information, all yourform, 10 90 nines, and 10 98, 10
90 eights are things for collegestudents.
Hey, you, you went to college 1098.
Sometimes your parents might beusing that instead of you.
Um, and, and the anyself-employment information.
Did you do any gig work
Speaker 1 (15:58):
And stuff like that?
Do you use them 10 98?
Uh, Oh, wait, I sent it to you.
Yeah.
Speaker 2 (16:03):
Yes.
You did send me your 10 98.
I have your 10 98.
Speaker 1 (16:07):
So that must be for dad.
Speaker 2 (16:10):
Now, if you itemize, you might, you need, uh, you
know, some additionalinformation.
So medical expenses, informationon medical expenses, charitable
nature donations and cash andgoods, uh, home ownership
information.
Did you pay property tax onyour, on your house?
Was there any mortgage intereston your, uh, on your house and
(16:32):
then any state taxes that youpaid, um, you know, sales or
income tax property, uh,property taxes.
Um, and then of course you'regonna need the tax forms.
So, uh, th th th that, that in anutshell are the things that
would, um, uh, would be neededby the majority of the folks.
(16:53):
And if you've got more complextax situations, you're obviously
going to need some, someadditional information.
Speaker 1 (16:58):
Wait, sales talks like receipts for buying stuff.
Speaker 2 (17:01):
Uh, you can do it that way.
You, you, you, there, there'sactually a couple of ways to do
it.
You can actually sum up thesales tax from everything that
you bought.
Speaker 1 (17:12):
Oh, so every single receipt I need to say,
[inaudible],
Speaker 2 (17:16):
That's one way to do it, but there, but there are
also, the IRS has calculatorsthat say, okay, if you made this
much money, you probably spent,you've probably spent this much
in the sales tax would be this.
Speaker 1 (17:31):
Did you ever do the safer seat methadone?
I have not done that yet.
It seems.
That seems like too much.
Every single time I bought food.
Speaker 2 (17:39):
Yeah.
Now, so I'm not doing that, butthere are, um, if you buy big
ticket items there, there'sessentially a blended method.
You can say, I spent all thismoney on these big ticket items
and then the rest, you know,
Speaker 1 (17:56):
Estimate.
Yeah.
So like you bought a Maserati.
No, I did not.
Well, I mean, but that has a lotof sales tax though.
Speaker 2 (18:05):
I'm sure it does, but I would not know.
Speaker 1 (18:08):
I was just, it was just an example.
Yeah.
Your mom would shoot me.
I wonder what yeah.
Don't ever do that.
Um, anyway, so let's move on toa subject that I think we all
can relate to.
I've gotten calls from the IRSand I don't even, I was when I
was a minor.
So if I get a call from the IRS,claiming that I owe money to the
(18:33):
IRS, what do I do?
Speaker 2 (18:35):
So, first of all, I'm going to clarify that statement.
Speaker 1 (18:40):
It wasn't from the IRS, I got a call from a scam.
It was a scam.
Let's just, if you get a callfrom the IRS, the IRS is not
calling you.
Let's just make that.
Speaker 2 (18:49):
Yeah.
Yeah.
Unfortunately, there are a lotof fraud attempts during taxis.
The IRS does not call IRS.
If they're notifying ataxpayers, you're going to get a
notification via the mail.
Not text, not email, not phone,not social media, no mail.
(19:12):
If you receive a call or amessage claiming that you have
to urgently respond for debtcollection or that they're, you
know, they're going to be somehorrible consequences, uh, to
you for that, right?
Don't give them yourinformation.
Speaker 1 (19:29):
Don't click on any links.
Don't click on it.
Speaker 2 (19:33):
Um, you know, get off the phone with they're on the
phone.
If you're on the
Speaker 1 (19:37):
Phone with them, hang up,
Speaker 2 (19:39):
Hang up, report them, report them to that phone
number.
Do not give out your socialsecurity number.
Do not give out any otherdetails.
You're better off just notanswering
Speaker 1 (19:52):
The IRS has your address, or they will go through
the cause.
Think about it.
The postal service is like aUnited States, federal
government institution.
Well, so that's official.
That's official.
Speaker 2 (20:05):
Well, look, that that is the method that the IRS uses
to contact.
Uh, um, they, they have, theywant to have a notice, uh, an
official notification record andyou can trace that through
Speaker 1 (20:21):
The mail.
Yep.
All right.
So what are some types of taxcredits?
We talked about this a littlebit earlier, but let's, let's
really get into it.
Speaker 2 (20:30):
So again, as you said it before tax credit reduced the
amount of tax you owe dollar fordoubt, and you may qualify for
specific tax credits based onyour situation and income level.
And there are three in general,there are three types of tax
credits.
They're non-refundable taxcredits, which can reduce the
(20:53):
tax that you owe to zero, butwill not allow you to get money
back.
And then there's a partiallyrefundable which can provide a
refund for some portion of thetax credit.
If you meet all thequalifications.
So it may say, Hey, we can read,we can reduce your income$2,500,
(21:17):
or excuse me, not reduce yourincome, reduce your tax$2,500.
But if you have zero tax thatthe credit is, you know, a
thousand, so you can only get athousand dollars back.
And then there are fully refundfundable.
Those that error enable a refundof the full amount of the
(21:37):
credit.
If your situation warrants, someof the more popular tax credits
out there, the recovery rebatecredit, which is in effect now,
um, uh, part of the, uh,American recovery plan.
And, you know, there was taxcredit, there's a tax credit.
If you haven't received, um,monies from the stimulus package
(22:02):
in January and March, you canclaim a tax credit and actually
get your money back, or, youknow, it'll either reduce your
tax or it can provide you with,uh,
Speaker 1 (22:15):
Oh, that was, yeah.
That was a big problem.
Cause like some people goteither the first check and
didn't get the second one ordidn't get any checks, although
they qualified.
So yeah, that's what you shoulddo.
Will it, will it do both thechecks or just one?
Speaker 2 (22:27):
Okay.
I think it will do both.
Um, but you know, from what I amreading people are typically
only having problems with one orthe other map, not both.
Okay.
But you know, there are a lot ofdifferent situations out there.
Um, so some other tax creditsthat are popular earned income
tax credits, if you haveextremely low wages while
(22:49):
working full time, and incertain situations you can get
earned income tax credits, childtax credits, childcare, or
dependent care tax credits,saver, tax credits to encourage
people to save for retirement.
Um, um, if even if they have lowincome, uh, energy saving
(23:09):
credits to build, you know, toget people to, um, invest in, in
green, uh, solar panels and allsorts of things that improve the
energy efficiency of their home,you can get a tax credit for
that, you know, uh, and also taxcredits for senior citizens, uh,
and foreign tax credit.
(23:31):
So if you pay tax, if, if youmake some money that from, from,
from an international, um, um,source, sometimes you have to
pay taxes to that country.
And so your us income tax canget a credit of the amount of
tax that you paid to another.
Speaker 1 (23:54):
Oh, that's nice.
Okay.
Um, what are deductions again?
We talked about this a littlebit last time.
Speaker 2 (24:02):
So taxes re uh, tax credits reduce the amount of tax
you owe dollar for dollar taxdeductions, reduce the amount of
gross income that you have thatwill reduce the amount that is
taxable.
Okay.
(24:23):
You know, most people, as I saidbefore, most people use the
standard deduction, which justrequires you to say, Hey, I want
to use the standard deduction.
You don't have to documentanything.
You just say out, I want to useit.
And you qualify for that.
Okay.
And again, if you have expensesin favorite categories that
exceed the value of the standarddeduction, you should itemize,
Speaker 1 (24:47):
Okay.
So what expense items qualifyfor deductions
Speaker 2 (24:52):
And, and just like tax credits where there's lots
of them.
There are lots of expenses thatqualify for deductions for
deductions.
Some of the most popular arestudent loan interest
deductions.
So college students should beaware of that charitable
donation, uh, deductions forcash and goods, mortgage
(25:12):
interest, medical expenses,state, and local, uh, tax
expenses.
If you're, if you go intoeducation, educator, expense,
deductions, health savings,account deductions, uh, even
deductions for contributions toyour 401k.
Speaker 1 (25:31):
Huh.
Okay.
Speaker 2 (25:33):
There are often limitations or special
qualifications that you mustmeet to qualify for some of
these deductions.
Um, for example, an IRAdeduction, well, not, not just
prove it.
You have to meet thesesituations to qualify, to be
able to take it.
So for an IRA deduction, youhave to work at a place that
(25:57):
doesn't have a 401k.
So if, if the place that youwork has a 401k, which is a
retirement plan, then you can'tuse the IRA deduction.
Speaker 1 (26:12):
Okay.
All right.
How much does it cost to dotaxes and are there free
services?
Well,
Speaker 2 (26:20):
For most of us, the complexity of our tax situation
will drive costs, doing yourtaxes yourself as free software
and online tools, uh, from themajor providers can provide, uh,
can, uh, have, uh, a variationin the price range, free version
.
So there are free versions, butthey are at those simplest, um,
(26:46):
least complex tax situations,uh, that w w two wage earners
standard deduction.
Yeah.
That, that can be free.
Uh, but most of the software nowstarts at about$45 range in
retail, but can go over
Speaker 1 (27:04):
A hundred bucks per year, 40
Speaker 2 (27:06):
And$45, uh, yes.
For that year, for, for thatyears now you might get more
than one use out of it.
Uh, so, you know, if I boughtit, then I could use it for
mine.
I could use it for yours ifyou're filing independently.
Um, and, and that would work.
Okay.
Oh, I forgot tax prepares taxprepares for simple type of
(27:31):
situations.
They can be in the 50 a hundred.
Well, it's going to depend onthe locale.
They can.
And so, but that's going to bethe most expensive.
Um, and, and typically folkswith more complex situations,
we'll, we'll venture off into,into that arena where it can
actually go into the thousandsof dollars.
(27:53):
But for, for, again, for mostpeople, even with simple, uh,
simple, um, tax situation, it,it won't cost that much more
than the, um, software.
Okay.
Because I'm just going to giveyou a secret, they use software
to,
Speaker 1 (28:08):
Oh, they have to have people out of business.
Speaker 2 (28:14):
They have, they have, you know, some different songs.
Speaker 1 (28:18):
Yeah.
They have professional gradesoftware.
Okay.
Uh, do I have to file statetaxes
Speaker 2 (28:23):
And that answer's going to depend on your state?
Cause not all States have incometax requirements, uh, Florida
doesn't um, um, and in lots ofStates that, that don't, uh, so
you're going to have to checkwith your, uh, your home state
of record to find out what therequirements are.
Speaker 1 (28:44):
Okay.
Uh, what if I work in one statethough, and live in another, do
I have to file two statereturns?
Speaker 2 (28:51):
Okay.
So now, now you're trying to getcomplicated on that.
Typically you're going to berequired to pay tax on the
income that you earn in eachstate.
So let's say I live inTennessee, but I earned my money
(29:11):
in Mississippi.
Well, if Mississippi has a stateincome tax, well, I'm going to
be required to pay something in,in, in Mississippi, um, States
that are on borders, whereeverybody pays tax, they work
out arrangements where, allright, if you earned the money
(29:33):
in one state, um, you don't haveto pay the tax twice there,
again, like it like the foreigntax credit.
It's sorta like a tax credit forpaying your taxes, Mississippi
then, and Tennessee, I wouldn'thave to, um, uh, pay, uh, the
tax.
Speaker 1 (29:50):
So like you live in Jersey, you work in New York
city.
Yeah.
You're paying tax for New Yorkor New York.
Well, they may have anarrangement, have arrangement
Speaker 2 (30:00):
Where you you're going to pay some tax to
Speaker 1 (30:03):
Jersey, both.
Okay.
So in that case,
Speaker 2 (30:06):
You're going to get it.
It could be, uh, a portion, butyou, again, now you got to go,
those are state specific
Speaker 1 (30:17):
50 different rules.
Uh, what happens though?
If I don't file my taxes.
Okay.
Speaker 2 (30:23):
Right.
If you're due a refund, the IRSwill just keep them out that you
were
Speaker 1 (30:27):
For two, three donation to the government.
Speaker 2 (30:30):
You have three years from the original expected
filing date to filing claim.
Any refunds after that time,period, you forfeit any refunds.
Yet.
If you owe the IRS, they willcalculate how much they think
you.
Speaker 1 (30:48):
Right.
Right, right.
Remember by mail, by mail, bymail.
They're not calling you for it,
Speaker 2 (30:55):
But this will include any penalties and interest on
the unpaid tax bill.
And if you ignore this, thepenalty and interest charges can
easily outweigh the original tax
Speaker 1 (31:06):
And they can come get that.
The statute of limitations onthat does not expire.
So we'll just say that.
Yes, that's correct.
And what happens if I can't paythe entire amount?
Speaker 2 (31:19):
Um, if you find that you don't have the resources to
pay the, uh, the entire amount,you can contact the IRS and work
out a payment plan.
They can work with you to createa monthly payment and it'll
include some interests.
And, uh, from my research, theirinterest is usually less than,
than loans or credit cardinterests
Speaker 1 (31:42):
Because you, right.
Speaker 2 (31:44):
And for the record, you can actually put your, um,
there are ways to put your tax,uh, payments on your credit
card.
And some people do that, but ifyou, Oh, you know, and it's a
significant amount and, and, andyou don't have the money to pay
it, you can work out a monthlypayment plan with the IRS.
(32:05):
And it's always better if youcontact them first.
Speaker 1 (32:08):
Yeah.
Don't wait, don't make them sendyou again a piece of mail
because that's how they'recontacting you.
All right.
Well,
Speaker 2 (32:17):
I don't think there's any more questions.
Speaker 1 (32:20):
No, that's it.
Speaker 2 (32:22):
So that's it for our show.
I want to thank you all so muchfor listening.
And, uh, I'm looking forward toyou joining us again, where we
will discuss.
Speaker 1 (32:31):
Yes.
And if you have any questions atall, for us, you can email
us@efespodcastatgmail.com andfollow our Instagram at E F E S
podcast on Instagram.
Thank you so much for listening.
Take care, everybody.
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