tax filing

How long does it take to get your tax refund?

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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Your annual income tax return may seem quite complex to fill out, but its structure is actually quite simple. On this document you calculate all of your earnings and subtract eligible deductions and credits.

The remaining amount is your taxable income, and you multiply this by the applicable tax rate to determine how much income tax you owe to the government.

However, in most cases, you prepay your income tax through deductions from your regular paycheck. If the amount you paid through these deductions during the year is greater than the amount you owe, you receive a tax refund.

After you file your taxes, you wait for the IRS to review your return and issue a refund. The IRS claims that it approves most tax refunds within 21 days but it can take longer.

Understanding this process can help you move the process along to get your refund.

How the IRS evaluates the return

Once your tax return reaches the IRS, an auditor confirms or questions the information you have provided, starting with the first section of the return. The auditor inspects the amount of money you claimed as income, which should accurately show every source of income you had over the course of the tax year.

If you are employed, you should have a form W-2 from each employer. This document contains the total wages the employer paid you during the preceding year.

If you are an independent contractor, you should have a W-9, which contains the same information. Copy all relevant earning and taxation information from these slips accurately on to your income tax return.

If you make a mistake entering information, the IRS must spend more time looking for the correction figures. Double-check your amounts before sending in your tax return to avoid this problem which extends the length of time you wait for your refund.

Tax deductions and credits

The more tax deductions and credits you claim on your annual tax return, the longer you wait for your refund. This is because the IRS must spend more time verifying the deductions and credits. This does not mean you should refrain from claiming legitimate tax deductions. Instead, just make sure to include clear documentation for each deduction.

For example, if you made a donation to a registered charity, you can deduct the dollar amount of the donation and lower your total taxable income. To make sure that the IRS agent auditing your tax return can confirm this deduction expeditiously, include the receipt. Do so with every deduction, reduce the wait time for your refund.

Conclusion

The IRS claims that it approves most tax refunds within 21 days of receipt of the return. However, the IRS does not issue refunds for anyone claiming earned income credit until after Feb. 15 so it has time to match the income you claim on the return with the amount reported by your employer.

If you request an electronic deposit, you receive your refund within one business week after your approval. Checks take up to four weeks to arrive in the mail.

Waiting for your refund may feel like a long time, but if you double-check your math and properly document each deduction and credit, you improve your odds of receiving your refund within the average 21 day period.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Filing Taxes as a Same-Sex Married Couple

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

same sex married couples, tax filing

The good news first: In many cases, if not most, filing taxes as a same-sex married couple in New York state should be as straightforward as it is for straight couples. The bad news: Well, it’s taxes. And taxes can be complicated and tedious.

Some Background First

In 2011, same-sex marriage became legal in New York state. It was already legal in a few other states, and in 2015, it became legal everywhere in the United States. You may have filed as a married same-sex couple on your state taxes since the 2011 tax year and, in 2015/2016, switched to married on your federal taxes as well. (This page breaks down what you were legally required to do.)

If you filed as single until your 2016 return so that you would have the same information on your federal and state returns, it’s possible you could get some money by amending state and federal returns from prior years. To be legally safe, you should amend any state returns from prior years that need changing.

If you transferred property during the past few years or did anything that may have changed due to the recognition of same-sex marriage, it may be a good idea to consult with an accountant.

Now to the Present

Now it’s 2017, and for the most part, same-sex married couples in New York can file taxes just as their heterosexually married counterparts do. A few considerations, though:

  • If you are married and adopt the child your partner gave birth to, you cannot claim the adoption tax credit. On the other hand, if you have yet to marry, you can claim the credit. Of course, the two of you should discuss whether getting married before the child is born is better for your family, both financially and emotionally.

  • Suppose you file taxes as married filing separately. Further suppose that one of you has yet to adopt a child who the other partner gave birth to or is the biological parent of. The legal parent is the one who should claim the dependency deduction.

At Herman and Company, CPAs. P.C., we can help you navigate through gay marriage tax filing and benefits. If you have any questions or are interested in a free consultation, contact us today.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

10 Key Tax Terms To Help You Cut Through The Jargon

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

tax terms

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The tax field has its own lingo, which adds to the complexity of the tax filing task. But don’t despair. Knowing these 10 key tax terms can help you cut through the jargon and have you talking taxes in no time.

1. AGI

Adjusted gross income, or AGI, is all the income you receive over the course of the year, including wages, interest, dividends and capital gains, minus things such as contributions to a qualified IRA, some business expenses, moving costs and alimony payments. AGI is the first step in calculating your final federal income tax bill.

2. Tax credits

Tax credits are much like credits you get from a store. After you calculate your tax bill, you can use the credit to reduce the amount that you owe to Uncle Sam. Tax credits are more valuable than tax deductions because they directly cut the amount of tax you owe, rather than reducing the amount of taxed income. A $200 credit, for example, will turn a $1,000 tax bill into only $800. A few credits could even give you a refund you weren’t expecting.

3. Tax deductions

Tax deductions are expenses the Internal Revenue Service allows you to subtract from your AGI to arrive at your taxable income. In most cases, the lower your income, the lower your tax bill. If, for example, a single filer has income of $38,000 and $8,000 in deductions, then he would pay taxes on only $30,000. The IRS offers all filers a standard deduction amount (more on this later).

Some other deductions — such as student loan interest, moving expenses, deductible IRA contributions and alimony payments — also are listed directly on the 1040A or long Form 1040. The term “deductions” is most commonly associated with the itemized deductions (more on this later, too) that taxpayers who file Schedule A claim.

4. Standard deduction

This is a fixed dollar amount that taxpayers can subtract from their income. The standard deduction is available to all filers and is determined by the taxpayer’s filing status. The amounts change each year because of inflation adjustments. You can find the current standard deduction levels listed on each of the three individual tax forms. Most taxpayers use this deduction method, which eliminates the need to itemize actual deductions such as medical expenses, charitable contributions and state and local taxes.

5. Itemized deductions

These are expenses that can be deducted from your AGI to help you reach a smaller income amount upon which you must calculate your tax bill. Itemized deductions include medical expenses, other taxes (state, local and property), mortgage interest, charitable contributions, casualty and theft losses, unreimbursed employee expenses and miscellaneous deductions such as gambling losses. Some itemized deductions must meet IRS limits before they can be claimed. When you itemize, you must file Form 1040 and detail your tax deductions on Schedule A.

6. Exemption

This is an amount the IRS lets you subtract from your income to reflect all the people who count on your income. You can claim as tax exemptions yourself, your spouse and your dependents. The IRS allows a set amount for each exemption and, as with deductions, this total is subtracted from your AGI to come up with your final, lower earnings amount upon which you must figure your tax bill. Your personal exemption amount is in addition to any tax deductions, either standard or itemized, that you claim.

7. Progressive taxation

This is the system in which higher tax rates are applied as income levels increase. The U.S. tax system uses progressive taxation with tax brackets starting at 10 percent and rising to 39.6 percent for the wealthiest taxpayers.

8. Taxable income

Taxable income is your overall, or gross, income reduced by all allowable adjustments, deductions and exemptions. It is the final amount of income you use to calculate how much you owe in taxes.

9. Voluntary compliance

This describes the philosophy upon which our tax system is based: U.S. taxpayers voluntarily comply with the tax laws and report their income and other tax items honestly.

10. Withholding

Also known as pay-as-you-earn taxation, the withholding method enables taxes to be taken out of your wages or other income as you earn it and before you receive your paycheck. These withheld taxes are deposited in an IRS account and you are credited for the amount when you file your return. In some cases, taxes also may be withheld from other income such as dividends and interest.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.