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Learn About Taxes With Our Tax Words Glossary And Tax Worksheet

Welcome to Tax Help MD’s complete tax words glossary. Our mission is to help people better understand every aspect of their taxes, including breaking down tax terminology. Because no matter how much you know, tax vocabulary can definitely be confusing.

We’ve created a list of vocabulary terms you might encounter while dealing with payroll, auditing, and anything else that has to do with the IRS. As you learn about taxes from Tax Help MD, you’ll be empowered to handle any time of income tax issue that comes your way.

And if you still have questions? We’re here for you. Schedule an appointment for a free consultation or check out our FAQ section to get the assistance you need with your taxes.

An offer in compromise is an agreement with the IRS to pay less than your full tax. If you’re not able to pay your tax debt—or if paying would create a financial difficulty in your life—the IRS may accept a lower tax amount. They’ll need to analyze your income, expenses, assets, and ability to pay. Learn more about what an offer in compromise is, including how to get expert offer in compromise help, below.

How Long Does an Offer in Compromise Take?

If the IRS agrees to your offer in compromise, you might complete the process in about six to eight months. If you receive a rejection, your appeal could stretch the process to a year or even two.

Here are the steps involved in a typical offer in compromise process:

  1. 3–6 Weeks: Work to take your offer to the “processable” stage—when you have you met the basic qualification requirements
  2. 4–6 Weeks: Your case is reviewed by a Compromise Examiner
  3. 4 Weeks—8 Months: Your Compromise Examiner decides what you could reasonably be able to pay
  4. Acceptance or Rejection: After a total of six to eight months, you receive the Compromise Examiner’s decision

How Much Should You Offer For an Offer in Compromise?

First, to get the IRS to consider an offer in compromise, you need to offer more than the lowest amount that the IRS thinks they can collect from you each month. How much is that? The IRS will base it on:

Your monthly income minus your fixed expenses (like food and rent, not leisure activities)

The amount you’re left with is considered your “disposable income,” and you should offer at least that number times 12 (for a full year) to the IRS for your offer in compromise.

Does an Offer in Compromise Hurt Your Credit?

No, an offer in compromise won’t hurt your credit. If you don’t pay your taxes, the government will create a tax lien showing that you owe them a payment. That fact will show up on your credit report. But when your offer in compromise is accepted, that tax lien can be taken off your report. However, to be sure, you may need to contact the credit reporting bureaus to have it removed.

Now that you know the meaning of “offer in compromise,” if you need guidance with this difficult tax situation, contact Tax Help MD. We even have an offer in compromise service that could be perfect for you. Our tax help relief services can help with all kinds of tax issues.

Someone who earns currently non collectible status has proven to the IRS that they do not have the means to pay back a tax debt they owe. Once a person reaches this status, the IRS will not attempt to collect taxes.

So what does non collectible status mean for the tax debt?

Currently not-collectible status is not a way of avoiding tax debt forever—it is simply a way of delaying the repayment of debt while the taxpayer sorts out their finances. The IRS will continue to assess interest and other tax penalties, and might even keep tax refunds and put them toward the existing debt.

Who Is Eligible For Non Collectible Status?

There are a variety of circumstances that may cause someone to be eligible for the IRS’ currently not collectible status. Taxpayers with this status must be facing financial hardship and meet at least one of these requirements:

  • Have just a few years left on a 10-year statute of limitations
  • Make less than $84,000 per year and have almost no money left over after paying for living expenses (must meet the IRS living expenses guidelines)
  • Get income exclusively from Social Security, unemployment, or welfare benefits
  • Are unemployed, with no alternative income source

What Qualifies As Financial Hardship?

The IRS considers a person or business to be in financial hardship if they have trouble paying for basic living expenses as outlined in the IRS guide. The person may not have any money left over after paying for basic expenses, or they may have just a little bit of money left, leaving them unable to pay taxes. The IRS determines financial hardship based on income level.

How To Request Currently Non Collectible Status

If you’re someone facing financial hardship, you may qualify for non collectible status. Here’s how to request currently non collectible status:

 

  • Fill out a Form 433
  • Gather proof of income and expenses to prove your financial hardship
  • Contact the IRS by letter or phone to request non collectible status
  • Gather additional documents the IRS asks you to send in
  • Fax in your Form 433 and other documents
  • Wait to receive currently non collectible status

Need help determining if you qualify for non collectible status? Schedule an appointment with Tax Help MD to find out more about requesting this status or to learn how long non collectible status might last for you. We can also help with any other tax questions or issues.

A tax lien is the federal government’s right to use a person’s assets, such as property or income, to collect on federal taxes that haven’t been paid. The IRS will send a bill, and if the owed taxes aren’t paid on time, they can place a federal tax lien on your property. Find out more about what a federal tax lien is, and answers to other important questions.

What Does a Tax Lien Mean?

When you receive a tax lien, it means that the federal government claims that you owe them taxes. In addition, they could add interest, other costs, and penalties to the lien.

What does this all mean to you? A tax lien lets you know that:

  • The government claims their legal ability to use your assets to pay your taxes, even before other creditors can, such as your mortgage provider.
  • Your credit report could show the tax lien and scare off potential creditors.
  • The sale of your home could be slowed when the lien is noticed during a title search.
  • A lot of your time could be wasted dealing with the IRS.
  • You could have trouble getting a small business loan.

How Long Do Tax Liens Last?

Tax liens usually expire after ten years. However, the IRS has the ability to re-file the tax lien. Plus, very few taxpayers wait the ten years, because the lien allows the government to take your earned income or property during that time and put it toward your debt. It’s best to work to get rid of the lien, either by paying what you owe or working with a professional resolution service like Tax Help MD.

How Do You Find Out the Payoff Amount For a Federal Tax Lien?

If you need to find out the amount of your tax lien, call the Centralized Lien Operation department within the IRS. Currently, their number is (800) 913-6050. The IRS can help you form a plan to pay off the lien.

Do you need help with a federal tax lien? Dealing with the IRS can be scary, but you don’t have to do it alone. Find out how we can get you through this difficult tax problem. You need someone at your side who has experience with this issue. Contact Tax Help MD today.

Dependent Exemption Definition

Dependent exemption is a type of tax exemption for dependents. It allows you to reduce your taxable income by excluding income for each dependent, which is a child or relative who depends on you to provide for them financially.

So what is a dependent exemption typical amount? This total changes from year to year, but as of 2019, taxpayers could exclude $4,200 from their income per dependent.

So Are Exemptions and Dependents the Same Thing?

Though the terms are related, exemptions and dependents are not the same things. The dependent exemption definition refers to the amount you can take away from your taxable income, while the dependent is the child or relative who depends on you financially. The IRS allows you to take an exemption for every dependent in your family.

What Qualifies Someone as a Dependent?

There are certain dependency exemption requirements the person filing the taxes must meet. A dependent is determined based on qualifying factors, such as:

●     The dependent must be a U.S. citizen, national, or resident, or a resident of Canada or Mexico

●     A dependent can only be claimed by one person

●     The dependent cannot be filing their own joint tax return

You must list their social security number in order to claim the dependent and be eligible for the exemption.

What Are the Advantages of Claiming a Dependent?

There are many reasons one might want to claim someone as a dependent—most importantly, because doing so can significantly reduce how much you owe the IRS. Here are some of the specific financial advantages of claiming a dependent, including credits and deductions:

  • Exclude $4,200 per dependent from your taxable income
  • Earn a child tax credit
  • Possibility of getting an additional earned income tax credit (EITC)
  • Earn dependent care credit

Wondering if you’re eligible for a dependency exemption? Contact Tax Help MD to find out. We’ve helped countless people pay their taxes and save money using our expertise. Get in touch now for help with your taxes.

The benefits received principle of taxation is the theory that citizens who have received advantages from the government (in the form of public goods and services) should pay for them. For example, those who use a certain road system should pay for maintaining those roads. This is one of the main ideas behind taxation: that public goods should be available for citizens, and that citizens will provide taxes and other forms of payment that will make them possible. However, the U.S. tax system is a “progressive” or “ability to pay” system, which is different than a system based purely on the benefits received principle. These payments can be through taxes, tolls, fees, and/or other methods.

Is the Ability to Pay Principle Better Than The Benefits Received Principle in Taxes?

The ability to pay principle states that those with greater ability to pay for public goods should pay more. The idea is that those with greater means are better able to contribute to the general good. This contrasts with the benefits received theory of taxation, which is based on the idea that all who use a benefit pay for it. The two principles are similar, though, as they both could alter taxes based on variable factors.

One could argue that citizens with greater resources got them through hard work and should not be forced to pay more taxes without receiving direct benefits. However, an opposing argument is that those with greater means often achieved them at least partially by receiving the benefits of society (which taxes help to fund).

Examples of Taxes Based on the Benefits Received Principle

What taxes follow the benefits received principle? A benefits received tax on gasoline uses the proceeds to fund road construction and maintenance. Those who pay the gas tax are likely to receive the benefits of roads. Another example that hits close to home for many is taxes that fund education, which millions of citizens use every day to improve their lives.

Want to Learn More About Taxes?

Keep building your knowledge of taxes. Tax Help MD can teach you all the major tax terms and concepts you need. Visit our FAQ page for other questions, and contact us if you need expert support with a tax problem. Use our tax services to protect yourself from fraud and other problems.

Ability to pay is a tax principle applied to certain U.S. tax laws, such as the progressive tax system that places higher tax rates on individuals who have a higher income. This principle states that those with a higher income should pay more in taxes because they have a greater ability to do so (not because they are using up more government resources.)

History of Ability to Pay Principle of Taxation

Many of our country’s current taxation principles are based on the theories of Adam Smith, an American economist and philosopher from the 18th century. The ability to pay principle of taxation traces back to 1771, when Smith published four principles of taxation in his political economy book, “The Wealth of Nations.”

The first principle states that all members of a nation should pay taxes in proportion to the amount of income they earn.

What Is the Difference Between the Benefits Principle and the Ability to Pay Principle?

The ability to pay definition separates it from the benefits principle in one key way. Both principles state that taxes should be proportional.

But the ability to pay principle states that the proportion should be based on income, while the benefits received principle states that the proportion should be based on the benefits received from goods and/or services the government gives out.

Where Can I Learn More?

Looking to learn more about the ability to pay principle or any other tax questions? Check out Tax Help MD to get more information about IRS taxation principles, or contact us today to get help with your taxes.

Adjusted Gross Income Definition

Adjusted gross income is simply your total gross income, including salary, business income, and other income sources, minus any income adjustments like retirement contributions or student loan interest. The formula looks like this:

Total Income – Adjustments = Adjusted Gross Income (AGI)

What is the Difference Between Gross Income and Adjusted Gross Income?

Your gross income is the total of all your sources of income before any adjustments are made to it. But your adjusted gross income (AGI) first takes your gross income and then subtracts adjustments from it.

That means that your AGI is often going to be a lower amount than your total gross income. It could be the same if you don’t have any adjustments, but it can’t ever be higher. Why is this important? Because you are taxed on your AGI, meaning you’ll pay less tax as your AGI gets lower.

How Do I Calculate Adjusted Gross Income from My W-2?

Although your adjusted gross income is not on your W-2, you can use it to calculate your AGI.  Start by finding your total wages on your W-2 from the previous year. Then, you’ll need to add other forms of income that are taxable, such as rental income, taxable gains, interest, and self-employment. (This is a partial list.) Finally, you’ll subtract any income adjustments (such as educator expenses) to find your AGI.

What Reduces Your Adjusted Gross Income?

In the US, the tax code lets you reduce your adjusted gross income on your tax return when you:

  • Contribute some of your wages into a health saving account (HSA)
  • Give money to charity
  • Sell an asset to balance capital gains
  • Contribute to an education savings plan (to adjust your state adjusted gross income)
  • Pay for your property taxes and/or mortgage interest before the end of the year

The ways that you can lower your adjusted gross income change from time to time on both a state and federal level, so it can be helpful to use professional tax services. If you need to learn more about taxes, contact Tax Help MD now for help with your tax problems.

When referring to an income tax return, the amount due refers to the total money a taxpayer must pay to the government. This only occurs when the total taxes are greater than the total tax payments for that year. For example, if you claimed too many allowances on your W-4 when you began a job, this can lead to under-withholding taxes, which can result in having to pay more on tax day.

If you have found a balance due on your return, not only is it vital that you understand the IRS amount due meaning but also that you take care of the amount as soon as possible. If you don’t, the IRS could place a failure to pay penalty, a percentage rate increase on your amount due that grows the longer you don’t pay. While this rate maxes at 25%, there is no reason to hold off paying your amount due.

What Does Proposed Amount Mean from the IRS?

The proposed amount due is very similar to the amount due on an income tax return, as it refers to an amount of money that is due to the IRS. However, a proposed amount due doesn’t have to be related to over or under-withholding.

For instance, you could receive a CP2000, sometimes called an underreporter inquiry. You can receive this notice when information on your taxes doesn’t match what is on the IRS’s records, such as if you took deductions and credits that your records say you shouldn’t have. The notice proposes taxes and possible penalties.

However, the CP2000 is generated by a computer, so it may not always be accurate. It is not uncommon for a taxpayer not to owe anything after a CP2000.

How to Pay Your Income Tax Return

If you are still wondering about the proposed amount and amount due, or are simply wondering how to pay your income tax return, know that your best option is to work with someone who intimately knows tax law, like a professional at Tax Help MD.

Our entire operation revolves around helping people like you understand their taxes and relieving your tax burden through proven methods.

Contact us today to schedule an appointment for a free consultation!

According to the IRS bonus definition, a bonus is additional financial compensation that goes beyond the normal expectations of an employee or executive. Bonuses can be distributed for a variety of reasons, one of the foremost being exceptional work. They can also be used as incentives for employee retention.

While bonuses are subject to income taxes, they aren’t simply lumped in with your income but are treated a bit differently.

How Are Bonuses Taxed?

Bonuses aren’t taxed according to marginal income tax rates as they are considered “supplemental income.” Instead, the IRS uses bonus tax rates. When looking at how bonuses are taxed, you’ll typically find that bonuses are subjected to a 22% flat rate. For instance, if you receive a $1000 bonus, you’ll have to pay $220 in taxes.

This said, if you receive a very large bonus, say over $1 million, any money received over the one million mark will be subject to a 37% tax rate. For example, if you receive a $1.5 million bonus, one million of that will be taxed at 22%, while the rest will be taxed at 37%, for a total tax of $405,000.

How Does a Bonus Affect Your Tax Rates?

Just as an employer can withhold money from your paycheck for taxes, they can also withhold money from your bonus. This is called tax withholding, and any funds held in this manner are sent to the IRS on your behalf.

With bonuses, employers can calculate withholdings with the percentage method or aggregate method.

The percentage method is the easiest of the two. They simply identify the bonus as different from your income and calculate withholdings using the rates mentioned above. Note that Social Security, Medicare, and state income taxes may also be withheld.

The aggregate method involves the employer paying bonuses alongside your wages, withholding taxes based upon your tax bracket. The initial tax withholding with this method is usually higher.

If you would like to learn more about how taxes work, contact Tax Help MD today. Our professionals know the law backwards and forwards and can’t wait to help you understand taxes better. You can also schedule an appointment for a free consultation.

A business tax is essentially any tax that has been levied on a business by the federal, state, or local governments. Most business taxes can be categorized into one of three groups:

  • Income Taxes: All businesses, with few exceptions, must file an annual tax return. The rate at which you are taxed depends on how your business is set up. For instance, C corporations are taxed at the corporate rate rather than the individual rate.
  • Estimated Taxes: Freelancers, independent contractors, and some small businesses that owe a certain amount of taxes are required to estimate and pay quarterly taxes.
  • Employment Taxes: Those who are self-employed are required to pay Medicare and Social Security taxes.

Filing Business Taxes

The act of filing business taxes isn’t known for its simplicity. Businesses, large and small, have plenty of variables to worry about during tax season. This said, there are few general steps every business will have to follow:

  1. Choose your tax year: (Most businesses choose the calendar year, but you can choose another.)
  2. Find out your federal, state, and local tax obligations
  3. Collect all relevant business records
  4. Find and fill out the right business forms (e.g., Schedule C, Form 1120, etc.)
  5. Make sure your taxes are done by the appropriate deadline.

The last step is incredibly important, as your deadline might not be April 15th.

Small Business Tax Advantages

There are numerous tax advantages that small businesses can utilize. Unfortunately, the IRS doesn’t have a master list, only going with the “Ordinary and Necessary” rule. Basically, if an item or service is necessary for your business operation, then it’s tax-deductible.

Here are some examples:

  • Rent
  • Home Office
  • Qualified Business Income
  • Utilities
  • Repairs
  • Car

If you need help filing business taxes, look no further than Tax Help MD. Our tax services are designed to help you relieve the burden of taxes and get on top of them. Contact us today for a free consultation.

Commission refers to additional compensation received by an employee after completing a task or tasks. Usually, a commission is gained after reaching a specific goal, like selling a certain number of products or services, either individually or over time. Commissions are also common for recruiters, who can get commissions based on placing a certain number of individuals.

However, many times people are confused about what is a commission vs. a bonus.

Commission vs. Bonus

When comparing the concepts of commission vs. bonus, you should note that a bonus is many times a fixed amount that is awarded after a specific condition is met, as opposed to being awarded by the completion of actions.

In a commission pay structure, employees are rewarded for successful actions, e.g. $5 per unit sold. In contrast, a bonus is not typically part of an employee’s regular pay schedule, but a reward for meeting an objective, e.g. a $200 bonus after 2000 units are sold in a month.

Do Commissions Get Taxed?

Commissions are taxed. They are usually lumped together with your regular salary and taxed according to your tax bracket, while bonuses are not. Bonuses under $1 million are typically subject to a 22% flat rate, with the portion over $1 million being taxed at 37%. Employers have a choice of withholding your taxes based on a percentage or aggregate rate. Withholding at a percentage rate is more common since it is both easier to understand and to implement.

Regardless of what method they use or whether your commission is lumped together with your salary, your employer will probably still withhold funds for Social Security and Medicare.

If you are still wondering about commissions vs. bonuses and how your taxes are affected by them, contact us today. Our tax services are designed to help you understand your tax burden as well as overcome it.

Direct deposit is when funds are delivered electronically into a bank account rather than distributed through a physical check. Examples that meet this direct deposit definition would be a payment from paychecks, tax refunds, Social Security, etc.

For this system to work, you need an electronic network that allows for deposits between banks. Such a network is called an automated clearing house and eliminates the need to wait for money to clear.

How Does Direct Deposit Work?

Direct deposit allows you to receive money safely and conveniently. Through the use of an electronic network, funds can be quickly transferred from one party to another. To send money to a recipient, they need to meet several direct deposit requirements by supplying:

  • The name of their bank
  • Their account number
  • Their bank’s routing number

Once the direct deposit system is set up, it is incredibly easy to deliver funds, as funds are deposited into the recipient’s account at midnight of the payment date.

Direct Deposit Benefits

Direct deposit comes with several major benefits over a traditional paper check. Here are some of the biggest benefits:

  • Transfers funds far faster than through a paper check system.
  • Provides a safe and convenient way to send/receive funds.
  • Is an easy system to set up.
  • Reduces the time to complete payroll, saving employers money.
  • Ensures payments are received on time.
  • Reduces the amount of paper used.

Ultimately, direct deposit comes with more benefits than downsides, as it helps all parties involved transfer funds better. However, if you are still wondering, “how does direct deposit work,” don’t worry. Tax Help MD is here for you.

Our professionals can help you learn more about any tax-related subject and can even help you relieve the burden of taxes through our proven tax process. Contact us today to schedule an appointment for a free consultation.

Curious to know the meaning of direct tax? A direct tax is a tax that is imposed upon organizations and individuals by an overarching entity. Taxpayers can encounter multiple types of direct taxes, such as:

  • Property tax
  • Income tax
  • Asset taxes
  • Corporation taxes
  • Etc.

What Is the Difference Between Direct and Indirect Taxes?

There is a key difference between direct vs indirect taxes. A direct tax is paid by the people/organizations the tax is imposed upon, while an indirect tax is imposed upon a single entity but is ultimately paid by a different person/entity.

What Are the Different Types of Direct Tax?

There are many direct tax examples in our current tax system. Excise taxes on retail sales, fuel, and cigarettes are all examples of indirect taxes, as the taxes aren’t originally imposed upon the consumer, but instead are passed along to them.

Some taxes are also referred to as consumption taxes. The clearest example of this is the value-added tax (VAT).

What Are the Advantages and Disadvantages of Direct Taxes?

The advantages and disadvantages of direct taxes are clear-cut. There are three main benefits of direct taxes:

  • Equitable: The burden of direct taxes cannot be shifted to another. Thus, they can ensure that the rich are taxed higher than the poor, each according to their ability to pay.
  • Economical: Direct taxes are far cheaper to collect than indirect taxes.
  • Social Awareness: Citizens feel more socially aware with direct taxes. They pay a certain amount and expect a certain amount of services in return.

Direct taxes do come with several disadvantages, however:

  • Direct taxes are evadable
  • Direct taxes are ultimately arbitrary
  • Direct taxes can disincentivize savings and investment

Regardless of what kind of taxes you have to face, there is help for you to get on top of them, and that help comes through Tax Help MD.

Whether it’s educating people like you about common tax questions, or supplying tax resolution solutions, our experts are on your side and can relieve the burden of taxes from your shoulders.

Contact us today to schedule an appointment.

Earned income is the total taxable compensation you earn through work. Income can be earned through traditional employment or self-employment. According to this earned income definition, net wages from self-employment also count.

Generally speaking, earned income is taxable, although at different rates, sometimes. Thus, it is important to learn about earned income, as it determines what income rate you are taxed at. For example, if you have self-employment income, you’ll pay all of your Social Security tax, instead of an employer paying half of it. Your earned income can also help determine whether you are eligible for tax credits.

Earned Income vs. Unearned Income

When comparing earned vs. unearned income, there is a distinct difference: earned income deals primarily with compensation from employment, while unearned income comes from sources unrelated to employment, such as through inheritance, or passive sources of income like rent.

The following are examples of IRS earned income:

  • Wages, salaries, bonuses, and tips
  • Net earnings after business expenses (self-employment)
  • Long-term disability
  • Union strike benefits

In contrast, here are some examples of what the IRS deems as unearned income:

  • Interest on savings accounts
  • Bond interest
  • Alimony
  • Child support
  • Stock dividends
  • Worker’s compensation
  • Retirement accounts such as a 401k
  • Inheritances

A major difference between unearned income and earned income is that taxes are often deferred on the former sources of income. As a result, this allows one to avoid IRS tax penalties or paying higher rates of taxes.

Call Tax Help MD Today with Your Earned Income Tax Questions

It is absolutely vital that you be able to fill your taxes correctly, especially when it comes to earned and unearned income. If you don’t, it could cost you dearly. The best way to ensure you fill out your taxes correctly is to have a professional in your corner that knows the tax law inside and out, like those at Tax Help MD.

Our tax services are specifically designed to help lift the burden of taxes off of your shoulders. We can tailor a plan to your financial situation. Contact us today to schedule an appointment with one of our professionals.

The Earned Income Tax Credit, also known as EITC or EIC, is a benefit designed to support low- to moderate-income working people. It helps reduce the amount owed on taxes and can even result in a refund. By design, it is meant to benefit working families more than workers without children who qualify for the EITC credit.

How Does the Earned Income Tax Credit Work?

To obtain the EITC, you must meet the earned income tax credits eligibility requirements, such as each qualifying member of the family having a valid Social Security number, and must file a tax return.

The EITC is intended to help subsidize working families while encouraging them to work at the same time. The credit is equal to a percentage of a worker’s earnings, up to a maximum amount. Both the percentage and maximum credit varies by the family size. In some cases, the EIC may provide a refund that is more than the income tax that was withheld from paychecks.

Who Qualifies for the Earned Income Tax Credit?

While the EITC credit is not known for simplicity, there are several straightforward eligibility
requirements, such as:

  • Must file as an individual or married filing jointly
  • Each qualifying member of the family must have valid SSNs
  • Filer must be older than 25 and younger than 65
  • Income must fall within the appropriated limits (depends on the size of your family)
  • Must have earned income, e.g. wages from working for someone or running a business.

Need Help Claiming EITC?

Knowing if you qualify for EITC credit, much less claiming it, can be incredibly difficult. At Tax Help MD, we’re here to help.

We excel at helping people like you get on top of taxes and get the most out of them. From walking you through tax benefits available for disabled children to filing the best, most honest tax return, we’re eager to take the burden of taxes off your shoulders.

Contact us today to schedule an appointment!

Certain businesses are designated as an Electronic Return Originator, or ERO, meaning that they are specifically licensed by the IRS to file tax returns electronically. It is also common for ERO tax companies to help prepare tax returns.

What Is ERO on Your Tax Form?

As stated above, an ERO is a company that files electronic tax returns and usually helps prepare them. The IRS only allows e-filings to be conducted through EROs. This is to help prevent fraud and interception and ensure the accuracy of the forms.

Typically, e-filing through an ERO can be much faster as it ensures that a tax return reaches the IRS more quickly and safely than a physical return. Examples of ERO tax companies are TurboTax and H&R Block.

Who Signs the ERO Tax Signature?

Ultimately, you are the person who signs an ERO tax signature. When using the services of an ERO, you may be required to fill out an authorization form such as form 8879, which gives your ERO the power to enter or generate your PIN.

For EROs, the signed authorization form is incredibly important to keep and store. Without it, they can incur large penalties from the IRS or even put the entire company at risk.

What Is the Difference Between ERO and EFIN?

As stated above, an ERO is a business that is an authorized e-file provider by the IRS. An EFIN, or Electronic Filing Identification Number, is a 6-digit number given by the IRS to applicants who have been accepted for e-filing.

These terms are often confused by many. It’s incredibly important to know the difference, because while both may be crucial for e-filing, an EFIN is ultimately what allows you to file electronically.

Get Tax Help Today!

With the tax code as complicated as it is, you’re going to need someone in your corner who knows the law forwards and backwards. You’re going to need Tax Help MD.

We use a proven 4-step process to help provide tax resolution to all kinds of taxpayers. Whether you are behind in your taxes or just need vital questions answered, we can help make the process as stress-free as possible. Contact us today to schedule an appointment.

A flat tax system is one in which every taxpayer pays the same tax rate, regardless of their income. This is in contrast to a progressive tax system where each taxpayer is placed into a different income bracket depending on their income, which results in people paying different amounts.

Several countries have established a flat tax, some of the most notable being Estonia, Lithuania, and Russia.

Flat Tax Advantages and Disadvantages

There are quite a few flat tax advantages and disadvantages to consider before implementing such a system.

There have been numerous proponents of a flat tax within the United States, including Senators Ted Cruz and Rand Paul. They claim that there are several advantages to implementing a flat income tax. According to its fans, those advantages include:

  • Flat tax system is fair, since everyone pays the same percentage
  • Possibility for higher economic growth
  • Simpler tax system and tax filing
  • Can eliminate other taxes

This said, a flat tax system also comes with several downsides:

  • System can negatively impact poorer taxpayers
  • It can benefit richer citizens
  • This system eliminates or diminishes the role of the IRS, leading to unemployment
  • It can cause the national debt to increase sharply

It is also worth noting that the evidence behind the flat tax promoting economic growth is disputed.

Progressive vs. Flat Tax: What’s the Difference?

As stated above, a progressive tax system involves tax brackets based upon income, while a flat tax doesn’t. However, there are more distinctions one should consider when comparing a progressive vs. flat tax system.

A progressive tax system typically has numerous write-offs for individual taxpayers, allowing them to effectively save money. Governments under such a system are also far more able to implement wealth distribution measures and can supply tax credits to promote beneficial behavior (e.g. making one’s home more energy efficient).

All in all, both systems come with distinct advantages and disadvantages.

Need Help Understanding Taxes?

It goes without saying that the American tax system is incredibly complicated. At Tax Help MD, we do more than help you define “flat tax”—we want to serve as a guide that can supply you with information and services that will take the burden of taxes off of your shoulders.

Don’t let taxes get you down! Contact us today and schedule an appointment to see how we can help you pay your taxes.

Be sure to check out our FAQ page for more information.

An injured spouse claim allows a person to reclaim their share of a joint tax refund that has been seized in order to pay a past-due debt/obligation of their spouse. The “injured spouse” refers to the person filing the claim. In order to file to regain injured spouse tax money, the debt cannot be jointly owned. An example of such a debt might include past-due student loans acquired before the marriage.

How Do I Qualify for an Injured Tax Refund?

So how do you qualify for an injured spouse tax refund? You must meet the following qualifications:

  1. You cannot be legally liable for any of the debt(s) in question. (Usually, said debts need to be acquired by your spouse before marriage.)
  2. You must have contributed to the income reported on your joint return, whether through earned income, interest, or profits from investments.
  3. You must have also contributed toward the taxes paid on your return.

If you are interested in learning more about how to qualify, contact us today.

How Long Does It Take to Get a Refund From an Injured Spouse Claim?

The time it takes for the IRS injured spouse claim, or Form 8379, to process depends on several factors, including how you file the claim.

  • Filing an injured spouse claim with a joint return electronically can take around 11 weeks to process.
  • Filing Form 8379 with a joint return on paper can take around 14 weeks.
  • Filing a claim after your joint return has been processed generally takes about 8 weeks.

How Do I File an Injured Spouse Claim?

Filing for taxes is hard enough without also needing to file for injured spouse taxes. To make an injured spouse claim, you will ultimately have to file IRS form 8379. If you haven’t filed your joint return yet, complete your return and then attach Form 8379 to it. If you have filed your joint return, you’ll need to mail the completed form to the correct IRS center.

However, if you want to ensure that you file correctly, Tax Help MD can help. We can work together to determine whether you qualify for injured spouse relief and ensure that you file your form correctly.

Contact us today to schedule an appointment!

IRS innocent spouse relief allows an individual to not be held legally liable for any improper, erroneous, and/or misleading tax filings filed by a spouse (or former spouse.) What innocent spouse relief means is that a spouse can be exempt from paying any taxes, interest, or penalties associated with those kinds of improper filings.

What Is the IRS Innocent Spouse Rule?

The IRS innocent spouse rule was made to protect individuals from liability from unknown erroneous filings made by a spouse under a joint tax return. Under the innocent spouse rule, an individual can file innocent spouse relief form 8857 as soon as they find out about a tax liability for which they believe should be held entirely by their spouse or ex-spouse. It may take up to six months after filing to determine if a tax return is available for relief.

Many are confused about the difference between innocent and injured spouse relief. Tax Help MD can help you discern which is best for you.

What Are the Different Types of Innocent Spouse Relief?

Currently, the IRS states that there are three types of innocent spouse relief. What are the three types of innocent spouse relief?

  • Innocent Spouse Relief
  • Separation of Liability
  • Equitable Relief

Innocent Spouse Relief refers to not being held liable for additional taxes, interest, or fees. Separation of Liability involves splitting taxes, penalties, and fees between both spouses. Equitable Relief allows individuals to qualify for relief if they do not qualify for the other two forms. Each type of relief must be pursued within a specific time frame.

How to Fill Out an Innocent Spouse Relief Form

If you are still confused about how innocent spouse relief works or are wondering how to fill out an innocent spouse relief form, don’t worry. Tax Help MD is here for you.

Our experts have years of experience helping people like you understand the innocent spouse relief rule. With our tax services, we can help you fill out form 8857 so you can get the help you need.

Schedule an appointment with us today so you don’t have to worry about taxes any longer.

Property tax is a tax or fee an individual or legal entity pays to a local government based on the assessed value of their property. Generally speaking, property taxes are regressive taxes, as they usually are implemented as ad-valorem taxes, which is a tax based on assessed value.

Property Tax Appeal Process

Many times, properties can be overvalued by assessors. If an individual or entity disagrees with the assessment given of their property, which is usually obtained through an assessment letter, they can undergo a property tax appeal process.

First, research should be done comparing the assessment of your property to other comparable ones. Next, you can talk to your local assessor about the assessment. If you still don’t like the results, you can appeal the review, with or without a lawyer. This last step can be quite lengthy, depending on the jurisdiction.

Reasons to Appeal a Property Tax Assessment

There are multiple reasons to appeal your property tax assessment. Here are a few of the major ones:

  • You feel as though your property has been overvalued in its assessment (and you can prove it).
  • You want to save money on your property taxes.
  • You want to potentially minimize your property taxes in the years to come.

The major benefit of the property tax appeal process is that you can save hundreds, sometimes thousands, of dollars. It is important to note that you cannot change the rate at which your property is taxed, just how much your property is valued.

Property Tax Appeal Tips

There are ways that you can make your property tax appeal process a smoother experience. Here are a few tips:

  • Find out the time frame in which you can appeal.
  • Appeal online if you can.
  • Check your emotions at the door—they’ll only make things worse.
  • Make sure you do thorough research.
  • Consult an attorney or tax professional.

If you are looking to ease your tax burden, look no further than Tax Help MD. We have helped clients from all walks of life breathe a little easier by working with them to reduce their tax burden. Contact us to schedule an appointment.

A tax deficit occurs when government expenditures overtake income from tax revenues.

Deficits can occur on many levels, whether they be a business’s budget deficit or even in personal budgets. On a national level, accumulated fiscal deficits add to the national debt. It is also a source of inflation and, if not corrected, will ultimately lead to a recession.

Can Income Tax Hikes Close the National Deficit?

It is possible, but income tax hikes would have to work in conjunction with other strategies, such as raising other taxes and deficit reductions, as income tax is only one part of the U.S. tax apparatus. Otherwise, the tax hikes would be untenable.

If income tax hikes were solely used, the lowest tax bracket could see rates rise up to 25%, and the highest could see rates in the high 80s. This could serve as a major blow to economic growth. Realistically, there would need to be significant reductions in the government’s spending as well as other solutions in tandem to help close the fiscal deficit.

How Does the Tax Deficit Affect Individuals and Economic Growth?

A large tax deficit can affect individuals and economic growth in multiple ways. Deficits can lead to higher marginal tax rates, which can discourage saving, investing, etc. It can also contribute to inflation, which in turn can lead to low economic growth.

That being said, it’s contested at what level high tax deficits begin adversely affecting the economy. At the same time, it is vitally important to observe the tax deficits as they will ultimately affect you in the long run.

Learn More About Taxes

The American tax system is intricate and incredibly complex. If you don’t learn and pay attention now, you’ll end up paying more later. With Tax Help MD on your side, you can learn and save more today.

With our expert tax services, we can help you understand the tax law and get on top of your taxes. Contact us today to schedule an appointment.

Electronic filing refers to filing taxes through the internet, rather than filling out paper forms and sending them through the mail or submitting them to an accountant. The government tax entity in each country approves certain software for this purpose. This benefits both the taxpayer and the government in ways that include:

  • Electronic filings often are less prone to errors because the software catches many of them—and because a worker doesn’t have to key in your information from a paper tax return to a computer at the tax authority office.
  • Tax returns are transmitted and received instantaneously.
  • You may receive a tax refund within a few weeks if sent by check, or even sooner if it’s direct deposited. In contrast, paper returns may take one or two months to yield a refund.

How to Pay Taxes When Filing Electronically

If you owe taxes on your tax return, there are several ways to pay. First, you could use an electronic funds withdrawal, which is often offered for federal taxes through tax professionals or tax software.

In the US, IRS Direct Pay is available to individuals to send yearly or quarterly tax payments from a bank account. Individuals receive immediate verification after a payment is received. Similarly, the EFTPS is a US system that businesses and individuals can enroll in to make electronic tax payments. The IRS also provides payment services on the IRS2Go mobile app.

Similar to vendors, the IRS can take credit and debit card payments over the phone or online, whether you e-file or send a paper return. The IRS may also accept same-day wire transfers if an individual’s financial institution provides this service.

Tax Help MD Can Help You File Your Taxes Electronically

Do you have any questions about electronic tax filing? Contact us for answers. Your e-filed taxes must be completed correctly, by a professional, if needed. Any mistakes can lead to a rejection and delays.

The Tax Doctor can also assist you with the process of getting out of tax debt. Make an appointment for a free consultation now to get your tax questions answered and to explore our services.

IRS Definition of Employee

Every business must understand the definition of an employee. If a business pays self-employed contractors, it does not need to withhold taxes from that pay. But with an employee, the business must calculate income, social security, and unemployment taxes based on wages.

What is the difference between a self-employed and employed worker? With an employee, a business has:

  • The authority to decide the way he or she works
  • Direction over the business and financial components of a job (whereas independent contractors make those decisions themselves)
  • A relationship with the employee that is understood as an employer-employee type

Some businesses attempt to classify workers as independent contractors when there is no other reason to besides tax avoidance. But if they can show that workers are not employees, they can reduce their tax burden.

How to Pay Employee Taxes

As a business, it is your responsibility to send withheld employment taxes to the IRS through an electronic funds transfer, along with Medicare and social security taxes. Before each calendar year starts, you also must decide which payment schedule you will use: either semi-weekly or monthly. Being late can cost you a percentage of the taxes.

You must also pay unemployment taxes every quarter if the amount exceeds $500.

Tax Help MD Can Help You File Your Taxes Electronically

Reach out to us with any inquiries about filing business taxes for your employees. Tax Help MD assists businesses and individuals with filing taxes correctly and paying off tax debt. Make an appointment with The Tax Doctor now to get a free consultation.

What Is Excise Tax?

An excise tax is a tax levied by a government within its borders on a certain product or activity. Usually, businesses pay excise taxes to the government. Businesses add taxes to the prices of products and services so that the consumers are effectively paying it for them. You usually will not see excise taxes or be aware of paying them because they are included in the item price.

The amount of an excise tax can either be specific (a certain amount for each unit of product or service) or ad valorem (a percentage of each sale). Excise taxes are often levied on:

  • Vehicle fuel
  • Sports wagering
  • Truck road usage
  • Alcohol
  • Tobacco
  • Airline tickets
  • Penalties in retirement accounts
  • Indoor tanning bed services
  • Property

Excise Tax vs Sales Tax

Sales taxes and excise taxes are added to products so that consumers are hardly aware of paying them. However, sales taxes are added as a percentage of the sale, whereas excise taxes are often a flat rate for every item, no matter its price.

For example, a vehicle purchase has a percentage sales tax added, but a bundle of cigarette packs has a flat excise tax added when a business purchases it. Plus, sales taxes are levied on almost all sales, whereas excise taxes are added to items that are connected to health problems or other types of harm.

Call the Experts at Tax Help MD to Get Help with All of Your Tax Needs

Businesses are responsible for filing and paying their excise taxes each quarter—and must remember to do so on time. In contrast, most individual taxpayers don’t need to consider excise taxes. However, if you are faced with an excise tax bill, in either case, you may need to consult a professional like The Tax Doctor on the right way to file it and pay it.

We can help you prepare and file your taxes or negotiate to pay off a tax debt. Call Tax Help MDl now or schedule a free consultation online to get all your tax questions answered.

Tax Exempt: What It Is and What It Means

What does it mean to be tax exempt? The government does not require tax on certain transactions and income types if they are tax exempt.

As an individual or business, you may report tax-exempt items on your tax return but only as a record, since you don’t have to pay taxes on them. In contrast to tax deductions, which reduce gross taxable income, tax-exempt items are left out of all tax calculations.

There’s another use of the term: An entire organization may also be tax-exempt, which means that a specified amount of the gifts and income they receive cannot be taxed.

How to Get a Tax Exemption

If you are not a dependent on someone else’s tax return, you can be granted a personal tax exemption on your own return. This is a set amount that lowers your taxable income.

Even though this sounds similar to a tax deduction, it is distinct and less restricted. You may also get an exemption based on each of your dependents.

Tax-exempt organizations fall under 501(c)(3) of the IRS tax code. Such an organization is exempted from paying income tax on donations or earnings. Taxpayers who donate to tax-exempt organizations may also lower their taxable income through their donation.

Tax-exempt businesses may be involved in:

  • Charity
  • Religion
  • Education
  • Charitable publishing
  • Science
  • Public safety testing
  • Amateur sports

Local or state laws may also grant tax exemptions to businesses that move into their region in the form of property or sales tax exemptions.

Tax Help MD Can Help You Prepare and File Your Taxes Correctly

Local, state, and federal tax laws are complex. There are many correct and incorrect ways to claim deductions and tax exemptions.

If you file your taxes with professional assistance, you can ensure you get the most benefit out of these laws. Contact us today to schedule a free 15-minute appointment. Trust The Tax Doctor to file your taxes right or to help you resolve a tax debt.

When the word “compulsory” is used when talking about taxes, it has two different meanings. For individuals, compulsory filing of income tax returns means that all who meet certain criteria are required to file a tax return. This informs the government of the total income you earned in a certain year and that you have paid the required taxes on it.

Not everyone is required to file an income tax return every year, however. There are thresholds based on your filing status, type of income, and your age. This interactive questionnaire from the IRS can help you determine if you are required to file a tax return.

The term “compulsory tax,” on the other hand, applies to employers and means something different.

What Is Compulsory Tax?

Compulsory Payroll Tax is a tax collected from paychecks by the government to fund specific programs, like social security. The collected taxes then go to funding different benefits packages for retirees, disabled persons, and children of workers who are deceased.

Employers withhold these taxes from employees’ paychecks as a requirement by law. There are regulations around the compulsory filing of income taxes that can be difficult to understand unless you’re in the tax world. To ensure you don’t make a mistake that could come up in a compulsory tax audit,  seek the help of a tax professional, like those at Tax Help MD.

Compulsory Tax Audit

As an employer, you may be subject to a compulsory tax audit, which is where your account books are reviewed by a specialized accountant who reports to the IRS. There are different tiers when it comes to these audits, and different qualifications related to a business’s profits, gains, and losses.

The books must be in order, and a business must have a compulsory tax audit done by an accounting and tax professional before a certain date, or late fees and penalties will be given out. Penalties range, with one being .5% of total earnings and sales for the previous calendar year. The IRS might order a compulsory tax audit if they find even the slightest of errors in the taxes filed by the business. Having an expert, like Tax Help MD, at your side can help you avoid being a compulsory tax audit.

Choose the Experts at Tax Help MD For All Your Tax Needs

When filing income taxes or taking care of payroll taxes, a complete understanding is essential. The last thing any business, organization, or individual wants is to give the IRS any reason to order an intensive audit due to their time-consuming nature. If you want to know if you have to file a tax return or have been disorganized in the past with your books and other accounting measures, calling a tax expert and discussing your concerns can help save you some headaches. To make sure you’re doing everything the correct way, hire a professional like Tax Help MD that can help you with all your tax needs.

In terms of earnings, gross income is the amount of money you made prior to taxes and other deductions being removed. When you file your taxes, the IRS asks for your gross income in the taxable year to help them figure out whether you owe them, they owe you, or you both break even. When you’re filling out your gross income on your tax return, have a tax professional double-check that the number you input is the pre-tax amount, or you could be wrongly taxed.

What Is Gross Income on Tax Return

On a tax return, there will be boxes that ask for your gross income. This pre-tax dollar amount helps the IRS calculate what you owe in federal taxes, and what you might owe for your state’s income taxes if it has them. Sometimes, you’ll be asked for an adjusted gross income. This is your income minus certain deductions and is used to calculate your taxable income. A professional like Tax Help MD can help you take advantage of any credits or deductions you qualify for, help you make adjustments to previous returns, or walk you through any other tax issues.

Choose the Experts at Tax Help MD to Help You File Your Taxes Correctly

Don’t trust just anybody to help you maneuver the tricky world of taxes. Whether you’re being haunted by the tax seasons of the past, or you’re just not sure how to go about filing your income taxes now that you have more than one source of income, the professionals at Tax Help MD are eager to assist. Whether you need to mend your tax history or want to maximize this year’s refund, we offer the services you need to make tax season the least stressful it can be.

Hire a professional like Tax Help MD who can file your taxes just the way you need them to be. Schedule your consultation appointment today.

It’s important to know exactly what exemptions are on your tax return, and fully understand the benefits of claiming them. Exemptions reduce the amount of your income that is considered taxable, thereby reducing your tax bill. Tax exemptions may be confused with tax deductions and tax credits, all of which reduce the amount of tax you owe. But they do so differently.

  • Tax exemptions reduce the amount of income that is taxable in the first place. They are based on filing status and the number of dependents you claim in that taxable year.
  • You must meet certain requirements for tax deductions, which then subtract either a flat amount or a percentage from your taxable income.
  • Tax credits are a dollar-for-dollar reduction to the tax you owe after everything else has been calculated on your income.

You can think of it as exemptions kick in at the beginning of your tax return, deductions happen in the middle of it, and tax credits are at the very end. Saving money on taxes through exemptions, deductions, and credits can be tricky to do correctly, but services like those provided by Tax Help MD can ensure you’re doing them accurately and in a way that most benefits you.

How Many Tax Exemptions Should I Claim

Preparing your taxes isn’t always the simplest thing to do. Seldom is it cut and dry, especially when it comes to figuring out tax exemptions and how to both file and claim them. Tax exemptions on a tax return act to reduce the amount you need to pay in taxes. There are multiple kinds of exemptions you can qualify for, such as:

  • Personal exemptions
  • Dependent exemptions
  • Organizations who are tax-exempt organizations
  • State exemptions
  • Local exemptions.

So how many tax exemptions should you claim? There are limitations on the number of exemptions you can claim. For example, if you live alone and are single, you are allowed 2 exemptions. Married couples who have one source of income can also file two. Filing too many or too few exemptions will give you the wrong tax liability, and could cause problems in the future. Speak with a tax professional to understand how many exemptions to claim and look into  other tax advantages you may qualify for.

Tax Help MD Can Help You Get the Best Tax Return Possible

Maximizing the benefits on your tax returns and ensuring your exemptions are accurate not only saves you money but also ensures you have no issues with the IRS in the future. Tax Help MD can help with this and other services like adjusting payroll tax issues, audit representation in the case the IRS encounters a mishap, payment plans to help you pay your taxes in a way you can manage to name a few. Schedule an appointment to see how the professionals at Tax Help MD can help with your specific tax needs.

For those who plan to live permanently in the United States, it is important to ensure you acquire official citizenship for many reasons. U.S. citizenship grants freedoms and protections that cannot be acquired without being a citizen. There are three paths to citizenship for foreign nationals:

  1. Citizenship through acquisition – applies to a child who automatically acquires citizenship although they were born outside the U.S.
  2. Citizenship through derivation – when a parent naturalizes, their children may automatically derive U.S. citizenship.
  3. Citizenship through naturalization – how a person not born in the United States voluntarily becomes a citizen.

Testing to become a U.S. Citizen applies to the naturalization process. In order to be granted citizenship, one must first meet the requirements to apply, like being at least 18 years old, being able to speak and write in English, understand basic U.S. history, and establish residency for a certain period of time (5 years as a permanent resident or 3 years as a permanent resident who has lived in a marital union with a U.S. citizen spouse). If such requirements are met, there are a few things that need to be done, such as participating in a naturalization interview and taking the citizenship and IRS residency test.

The IRS pays close attention to citizenship, and vice versa. If someone who owes back taxes tries to apply for citizenship, their application will likely be denied due to the information the IRS provides. It’s important for the IRS to know one’s citizenship for tax codes, to determine whether to tax someone for U.S. federal income taxes, and to decide how they might be taxed. Having a clouded tax history is something the IRS likes to know, and something that you can take control over without legal implications.

How Does the IRS Determine Residency

When it comes to determining residency, the IRS will consider when you met the substantial presence test in that calendar year. To meet the requirements for this test, you must be physically present in the U.S. for at least 31 days in a calendar year, or 131 days over a 3-year period of time. Knowing the dates you met the requirement is important when filing taxes because unlike residents, alien residents are taxed on U.S. income only. Until you turn in your green card and take the IRS residency test, you will not be taxed as a U.S. citizen.

Tax Help MD Can Help You Prepare and File Your Taxes Correctly

Filing your taxes can be tricky for a lifelong U.S. citizen. When you’re a resident alien, preparing taxes can be even more complicated. To ensure you’re being taxed fairly, or if you have tax mishaps from the past that need to be cleaned up, hiring a professional like Tax Help MD can ensure your taxes are filed correctly and on time. If you have questions about what is required from the IRS to prove you are a resident, or how to go about the filing process,  find out how Tax Help MD can help you with all of your tax needs. Schedule an appointment today.

In regard to taxes, the head of household (HOH) represents any unmarried individual who pays more than half of the costs of maintaining a household throughout one calendar year. When you file as a head of household, different taxes will apply, allowing for higher deductions with a lower tax rate. This filing can be applicable if you’re divorced or legally separated, or if you’re the primary caregiver for a family member such as a parent or a niece. Knowing whether you can file with the head of household status could reduce what you owe in taxes, or increase what you get in your return.

How Does Head of Household Affect Taxes

Unmarried couples and family members who care for their family members and bring in the majority of the income for the household may qualify for head of household status if they meet the following criteria:

  • You pay for more than half of the household expenses (such as rent or mortgage, utilities, groceries, and other common expenses)
  • You are considered unmarried for the tax year
  • You have a qualifying child or dependent

Head of household status offers some advantageous tax benefits. Making sure that you qualify and that your taxes are filed correctly can save you from an unnecessary audit by the IRS. One of the many services that Tax Help MD can provide is to review your tax documents and make sure they’re all in order before filing.

 Tax Help MD Provides Solutions For Your Tax Problems

Taxes aren’t always easy, especially when you have write-offs of tax exemptions to add to the cluster of papers often created while doing taxes. Making sure you get them done right helps you avoid any future problems with the IRS, and shows that you can take responsibility for yourself and your financial obligations.

With tax solutions from Tax Help MD, your questions about the head of household taxes and other deductions or credits you qualify for can be answered with certainty as we work tirelessly to ensure we’re giving you the best solutions for your tax woes. We start with a thorough assessment of your situation, then walk you through every step to take care of your tax needs. You don’t have to face the IRS alone.

When you’re in the middle of tax return chaos, hand over your headache to a professional like Tax Help MD. Get a free assessment when you make an appointment.

Federal income tax is the tax that the IRS (Internal Revenue Service of the United States) charges annually on individual earnings, as well the income of trusts, corporations, and other entities. Income can be from jobs, investment capital gains, and many other sources. The federal tax is separate from state income tax.

Federal income tax is the biggest source of US government revenue. The federal government uses it to fund programs ranging from infrastructure projects to disaster relief to education. It also pays government workers, sends relief to the poor, funds special projects like space exploration, and much more.

How Much Is Federal Income Tax?

Federal income tax is calculated yearly based on a percentage of your income. What percentage is used? This depends on the tax bracket you are currently in, which is based on your income level. Tax law changes each year, so these numbers can be different from one year to the next. For 2020 taxes, for example, these are the percentages of income you pay in tax and the income amounts that put you in that bracket:

10%

Single (and Married Filing Separately): $0–$9,875
Married Filing Jointly: $0–$19,750
Head of Household: $0–$14,100

12%

Single (and Married Filing Separately): $9,876–$40,125
Married Filing Jointly: $19,751–$80,250
Head of Household: $14,101–$53,700

22%

Single (and Married Filing Separately): $40,126–$85,525
Married Filing Jointly: $80,251–$171,050
Head of Household: $53,701–$85,500

24%

Single (and Married Filing Separately): $85,526–$163,300
Married Filing Jointly: $171,051–$326,600
Head of Household: $85,501–$163,300

32%

Single (and Married Filing Separately): $163,301–$207,350
Married Filing Jointly: $326,601–$414,700
Head of Household: $163,301–$207,350

35%

Single (and Married Filing Separately): $207,351–$518,400
Married Filing Jointly: $414,701–$622,050
Head of Household: $207,351–$518,400

37%

Single: $518,401+
Married Filing Jointly: $622,051+
Head of Household: $518,401+
Married Filing Separately: $311,026+

One other nuance of the federal income tax system is that you owe a given percentage of tax only on the income within that bracket. For example, a single person who earned $30,000 during 2020 would owe 10% on the first $9,875 of her income and 12% on her income between $9,876 and $30,000.

Contact the Experts at Tax Help MD for All of Your Tax Needs

Now the next time someone you know asks, “What is federal income tax?” you’ll have a few interesting things to say. Education is a big part of what Tax Help MD is all about, along with expertly preparing and filing your taxes and helping you resolve back taxes.

If taxes are confusing to you, make sure that yours are filed correctly and that you don’t incur penalties. Contact us to file your taxes with Tax Help MD and get advice on any other tax needs.

An authorized IRS e-file provider is a tax professional that can prepare tax returns and file them through the IRS (Internal Revenue Service) electronic filing program. The IRS set up this program to allow businesses and individuals to file and pay their taxes online.

Professional tax preparation service providers must apply to the IRS, complete a registration process, and be approved to become authorized e-file providers. They are skilled at formatting tax data for the e-file system. So, individuals and other businesses know they can trust these providers to file their taxes correctly and efficiently.

Why Use an Authorized E-File Provider Service?

When you file your taxes, you have many choices. What benefits do you receive by using an IRS e-file provider, such as Tax Help MD? Can our services improve your business and your life? We know they can. We can:

  • Prevent Mistakes: We’re experienced at formatting data correctly and checking for errors before filing.
  • Upload Forms Faster: If you work at a business, we can transmit dozens or hundreds of your forms at once.
  • Help You Meet Deadlines: If you need to file at the last minute, we can accept your forms on the final day and transmit them quickly.
  • Use Last Year’s Information: We can reuse some of your data from the previous year in order to save you time.
  • Offer Superior Customer Service: Chat online with us or call us when you have questions, and we’ll give you the best customer service in the business.

Contact the Experts at Tax Help MD For All of Your Tax Needs

As an authorized IRS e-file provider, we can prepare and file your taxes in the most efficient way that technology can offer today. Plus, Tax Help MD is focused on helping you get out from under IRS problems, educating you, and guiding you until you’re free of tax debt and other challenges.

Let us prepare your taxes professionally and answer all your questions. Contact us today to have your taxes prepared by experienced professionals who can satisfy all your tax needs. Schedule an appointment now.

A tax return is the set of forms that a taxpayer turns in to the IRS in order to assess their tax requirements. But they’re not required for everyone. Who needs to file a tax return? Who doesn’t need to file a tax return? (Learn more about tax basics like terminology, concepts, and procedures.)

Minimum Gross Income

One way the IRS decides if someone must file a tax return is their gross income . If it’s above a certain level, a tax return may be required, if other characteristics are also met, such as age.

Your gross income is the total of all the payments that you receive from all sources, as long as it is not tax-exempt. And payments can be given in the form of various types of money, goods, property, and services.

Since there was a standard tax deduction for single taxpayers of $12,400 in 2020, many people would not need to file a tax return if their gross income was less than $12,400. This deduction is the amount that you can subtract from your gross income to come up with your total taxable income. For example, let’s say:

  • Your income is $12,400
  • You subtract the $12,400 standard deduction
  • Your taxable income would be $0

In other words, a single taxpayer would only need to file a tax return if his or her income was above $12,400. (NOTE: This is not official tax advice, which you would need to receive from a tax professional like Tax Help MD before you make decisions about your tax returns.)

Filing Status and Age

The standard deduction changes based on your filing status and age, also. Here are the figures that were used in the 2020 tax year:

  • Single, up to age 64: $12,400
  • Single, age 65+: $14,050
  • Married, filing jointly, both spouses up to age 64: $24,800
  • Married, filing jointly, one spouse age 65+: $26,100
  • Married, filing jointly, both spouses age 65+: $27,400
  • Married, filing separately, all ages: $5
  • Head of household, up to age 64: $18,600
  • Head of household, age 65+: $20,300
  • Qualifying widow(er), up to age 64: $24,800
  • Qualifying widow(er), age 65+: $26,100

Filing When Not a Citizen

Are you a non-citizen who still needs to file a tax return? If you are being paid in the US, visit IRS.gov to find out more about the requirements, which are based on your sources of income and your filing status.

If you are required to file a tax return, you’ll need a social security number or individual taxpayer identification number, along with specific advice about which form to file for your situation.

Call Tax Help MD for Help Filing Your Tax Return

It is extremely important to file a tax return if it is required of you. It’s true that there are some who don’t need to file a tax return when they are below a certain level of gross income. However, you should consult with a tax professional in order to stay on the right side of the law. Contact Tax Help MD, and set up an appointment for your tax consultation.

What Are Financial Records?

Financial records are all the documents that keep track of your financial transactions, decisions, and obligations. They can include receipts of purchases, policies, contracts, licenses, certificates, invoices recording products or services sold, and accounting documents like general ledgers, cash flow statements, balance sheets, and income statements.

In a business, financial records are crucial to keeping track of the flow of money. In your personal or home accounting, financial record keeping is also important for filing taxes, tracking your assets, returning products, and much more.

What Financial Records Should I Keep?

There are several ways of deciding this. One way is to think about what you’ll need for your taxes, which are a major expense for any business or household. The IRS recommends you hold onto these records (for your personal accounting, business, or both):

  • Tax Return Support: Any records you need to prepare your tax return and give evidence for the expenses, credits, and income you report on it
  • Listings of Deductible Expenses: Documentation of expenses that you will deduct from your taxes
  • Income Sources: All the ways that you receive income or assets, including which are related to your business and which are personal
  • Property Basis: This is the amount of investment you have in each property asset
  • Income Statement: Your income and expenses for your business
  • Balance Sheet: Your assets, liabilities, and equity

How Long Should I Keep Financial Records?

It’s important to keep records for as long as they are useful and needed—and no longer. Here are some guidelines for how long to keep each type of record:

  • Receipts: Until they can’t be used for a warranty or exchange—or until used for taxes
  • ATM Receipts: 1 month, until used to balance your checkbook
  • Paycheck Stubs: 1 year, until used in annual tax returns
  • Utility Bills: 1 year, or 3 years when used for tax deductions
  • Bank Statements: 1 year, or 3 years when used for tax deductions
  • Canceled Checks: 1 year, or 3 years when used for tax deductions
  • Credit Card Receipts: 1 year, or 3 years when used for tax deductions
  • Quarterly Investment Statements: Until you receive an annual investment statement
  • Tax Returns: 3 years or longer, in case of audits
  • Medical Bills: 3+ years
  • Property Sale Records: 3+ years
  • Stock Sales Records: 3+ years
  • Supporting Documentation on a Tax Return: 3+ years
  • Investment Statements: 3+ years
  • Canceled Insurance Policies: 3+ years
  • Home Improvement Records: 3+ years
  • Documentation You Finished Payments on a Loan: 7 years
  • Documentation You Finished Payments on a Mortgage: Forever
  • Contracts: Until inactive
  • Stock Records or Certificates: Until inactive
  • Property Records: Until inactive
  • Insurance Records: Until inactive
  • Retirement Income Plans: Until inactive
  • Property Tax Bills You Disputed: Until the dispute is over
  • Birth Certificates and Adoption Documents: Forever
  • Wills: Forever
  • Death Certificates: Forever
  • Marriage Licenses: Forever

Financial records can seem intimidating, but we have the solutions. For any questions you have about your financial record keeping, contact Tax Help MD to get professional answers. You can also schedule an appointment online for a time that is convenient for you, or check our frequently asked questions to see if your answers are there.