Latest news with #FreeFile
American Military News
6 days ago
- Business
- American Military News
IRS Direct File will be cancelled if Republican tax bill becomes law
The $3.8 trillion Republican tax bill that just passed the House includes a provision to kill off the popular IRS Direct File program, which lets people file their federal income tax returns for free online. The bill still needs to pass the Senate to become law, but if the bill is enacted as currently written, the Direct File program is slated to be eliminated within 30 days of the law's passage. The bill also requires the U.S. Treasury Department to create a task force to design a partnership between the IRS and private-sector tax service providers. The task force would need to identify ways to replace any 'free file programs and direct e-file tax return systems.' That includes the IRS Free File program, an existing public-private partnership. IRS Direct File, which is separate from the Free File program, is a popular free option that offers guidance and support as you fill out your federal income tax return and file your taxes directly with the IRS. Most taxpayers have rated the Direct File program positively: About 90% of taxpayers said their experience was excellent or above average, according to a survey by the General Services Administration of about 11,000 Direct File users in 2024. On top of that, interest in the program is clear: About 73% of taxpayers said they'd be somewhat or very interested in using Direct File, according to a Tax Policy Center report in March, based on a survey of taxpayers aged 18 to 64. The Direct File program has been in Republican lawmakers' crosshairs for a while. In December, almost 30 Republican lawmakers sent a letter to President-elect Donald Trump, calling for him to end the Direct File program on his first day in office. Lawmakers in the U.S. House of Representatives introduced legislation last July to end the Direct File program. Elon Musk, de facto head of the 'Department of Government Efficiency,' or DOGE — also isn't a fan of the program. In February, he posted on social media that the government tech office that developed the Direct File program had been 'deleted.' Currently, the IRS's Direct File page is still up and running. Direct File doubled its reach to 25 states for the 2025 tax season, up from 12 states in 2024, the program's pilot year. An estimated 30 million taxpayers qualify for the Direct File program in 2025, the IRS says. More than 140,000 taxpayers filed their federal tax returns through the Direct File program in 2024. The Direct File program also expanded to accept more types of tax situations for the 2025 tax season. While taxpayers who used the system in 2024 could claim a handful of tax credits, including the earned income tax credit and the child tax credit, that list expanded for this filing season to include the child and dependent care credit, among others. However, taxpayers who want to claim other tax credits, such as the American Opportunity Tax Credit for higher education costs, or the tax credit for the costs of adopting a child, won't qualify for Direct File. And if you're hoping to deduct IRA contributions, Direct File doesn't support that. (See the full list of credits and deductions supported by Direct File on this IRS page.) The Direct File program, now in its second year, allows taxpayers to file their federal tax returns electronically with the IRS. The no-cost tool guides taxpayers through every part of their federal income tax return. Taxpayers can file using a smartphone, computer or tablet. One of the program's advantages is that, if you have questions as you're working on your return, you can get live support directly from the IRS via chat or phone. IRS representatives can answer basic tax questions and help with technical issues in English and Spanish. The Direct File program has income limits, as well as limits on the types of income, deductions and credits you can enter on your tax return. For the 2025 tax season: —Your income must be less than $200,000 (less than $168,600 if you have more than one employer), and if you're married filing jointly, your spouse's income also must fall below these limits. —If you're married filing jointly, your combined income must be less than $250,000. —If you're married and file separately from your spouse, your income must be less than $125,000. To be eligible for Direct File, your income can come from the following sources: —W-2 wages —Social Security income —Unemployment compensation —Interest income —Retirement income (reported on a 1099-R — limited eligibility starts March 2025) But if you're self-employed, or have business or rental income, you can't use Direct File. Same goes for IRA contributions or distributions: If you have either, you can't use Direct File. You can use the IRS Direct File program only if you claim the standard deduction — the program isn't available to people who itemize. But you can claim certain above-the-line deductions: student loan interest, educator expenses and health savings account contributions. You can't use Direct File if you want to deduct your IRA contributions. The Direct File program supports the following tax credits in 2025: —Earned income tax credit —Child tax credit —Credit for other dependents —Child and dependent care credit —Premium tax credit —Credit for the elderly or disabled —Retirement savings contribution credit However, if you want to claim education credits, credits for energy efficient home upgrades or the adoption expense credit, you can't use the Direct File program. More taxpayers will have access to the IRS Direct File program in 2025. In 2024, the IRS kicked off the program with only 12 states; that number has expanded to 25 states for the 2025 tax season. For some of the states that participate in the IRS Direct File program, your federal return information will be transferred automatically to the state tax website, but in some cases you'll have to re-enter your information. Visit this IRS Direct File page to get the details for your state. Here is a list of the participating states: Alaska, Arizona, California, Connecticut, Florida, Idaho, Illinois, Kansas, Maine, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Washington, Wisconsin and Wyoming If you don't qualify for the IRS Direct File program, you may have other options to file your tax return for free. In addition to Direct File, the IRS offers the Free File program, in which it partners with online tax software providers to provide free federal income tax return filing. Some providers also allow you to file a state income tax return. For the 2025 tax season, your adjusted gross income must be $84,000 or less to qualify for the Free File program. That AGI applies to any filing status: married filing jointly, single, head of household, etc. The IRS also offers the Volunteer Income Tax Assistance (VITA) program, which provides certified volunteers to prepare basic tax returns if you earn less than $67,000 a year, are disabled, or speak limited English. You can find a site near you by visiting this IRS page. ___ © 2025 Distributed by Tribune Content Agency, LLC.
Yahoo
30-04-2025
- Business
- Yahoo
Here's Why the IRS Makes You Calculate Your Own Taxes in 2025
America's tax code can be a rather tricky one, making the process of doing your taxes seem incredibly laborious — not to mention expensive. Year after year, taxpayers have to make their way through the complicated and costly tax system to discover whether they are owed a refund or owe the federal government taxes. Find Out: Try This: Ever wonder why you have to file a complicated return at all? Forty years ago, in 1985, then-President Ronald Reagan pressed for an American tax system that would be 'return-free,' predicting that over 50% of taxpayers wouldn't file at all — any taxpayer with a basic return would simply receive their refund or a letter notifying them of any taxes owed to the federal government. Only taxpayers who chose to file their own taxes — which they could initially choose to do or choose because they disagreed with their amount refunded or owed — or who had more complicated returns would file the way all taxpayers currently do. Check Out: Additionally, chief economist for President Barack Obama Austan Goolsbee pushed in 2006 for a 'simple return,' in which taxpayers would actually receive a completed tax form from the government and would only be asked to review the form for any errors. Goolsbee argued this would save taxpayers at least $2 billion in tax preparation fees. Those tax preparation fees, though, are exactly why taxpayers are required to continue filing the more complicated way, per the Nebraska Examiner, which stated that the commercial tax preparation industry continually lobbies Congress to keep the American tax system the way it is. Although there are free tax filing options — the IRS Free File program, for one, which partners with public tax preparation services — the government made a deal with the commercial tax preparation industry in 2002 to not compete in the tax prep market and not release a free tax preparation system, the Nebraska Examiner reported. In 2007, the House of Representatives struck down legislation that would have enacted free government tax prep for taxpayers. In 2019, Congress attempted — but failed — to block the IRS from creating free online tax preparation. Time and time again, the private sector tax preparation industry has fought for survival by lobbying Congress not to impede upon its commercial territory, arguing they prevent tax mistakes and tax evasion. With the current complicated tax system, the private-sector tax preparation industry keeps itself necessary for taxpayers confounded by America's laborious tax code. More From GoBankingRates6 Reasons Your Tax Refund Will Be Higher in 2025 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth The New Retirement Problem Boomers Are Facing Sources National Archives, 'Address to the Nation on Tax Reform.' The Hamilton Project, 'The Simple Return Reducing America's Tax Burden Through Return-Free Filing.' Nebraska Examiner, 'The IRS already has all our income tax data — so why do we still have to file taxes?' This article originally appeared on Here's Why the IRS Makes You Calculate Your Own Taxes in 2025
Yahoo
17-04-2025
- Business
- Yahoo
Citizens Against Government Waste Names Sen. Elizabeth Warren April 2025 Porker of the Month
WASHINGTON, April 17, 2025--(BUSINESS WIRE)--Today, Citizens Against Government Waste (CAGW) named Sen. Elizabeth Warren (D-Mass.) its April 2025 Porker of the Month for her efforts to expand the Internal Revenue Service's (IRS) Direct File system to prepare and collect everyone's taxes. Direct File is duplicative, costly, and dangerous. It not only competes with the IRS's Free File system that gives taxpayers the ability to use private sector programs but also is limited and ineffective since it cannot be used for state income tax returns and taxpayers were unable to claim education tax credits. In December 2024, the IRS estimated that Direct File would cost $24.6 million and be used by at least 2.3 million taxpayers. But a March 20, 2025, Treasury Inspector General for Tax Administration report said it cost $33.4 million and only 104,800 returns out of 423,450 filed were accepted. Direct File was also set up without any statutory authority. CAGW President Tom Schatz said, "Sen. Warren's push to expand the duplicative and wasteful Direct File program shows her complete disregard for protecting taxpayer dollars and information. Only taxpayers know their personal financial situation, but Direct File is allowing the IRS to become the preparer, biller, and enforcer of everyone's taxes. Filing taxes is already difficult and stressful enough for taxpayers. Sen. Warren should be ashamed of her proposal that will waste money and harm taxpayers across America. For her efforts to expand the size and scope of the IRS's power and take away personal control, Sen. Warren was an easy choice for this month's Porker." Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, abuse, and mismanagement in government. For more than two decades, Porker of the Month is a dubious honor given to lawmakers and government officials who have shown a blatant disregard for the taxpayers. View source version on Contacts Alexandra Abrams (202) 467-5310aabrams@
Yahoo
17-04-2025
- Business
- Yahoo
How do I apply for a tax-filing extension? What time are taxes due? Your last-minute Tax Day questions, answered.
Tax season is nearly done, which means last-minute filers are just beginning their sprint to submit their income-tax returns. Tuesday is Tax Day, the last day to pay any owed 2024 income taxes. It's also the final day to either file a tax return or claim an extension. Taxpayers have until 11:59 p.m. in their local time zone to file, according to Mark Steber, Jackson Hewitt's chief tax officer. Wall Street's 12 favorite stocks could soar as much as 54% over the next year, analysts say Americans are 'doom buying' coffee, olive oil and soap. What's the one thing I should stockpile to avoid tariff price hikes? The U.S. dollar's role as the de facto global reserve currency is looking increasingly uncertain Why this strategist is expecting a lost decade for U.S. stocks, even without a recession 'My house and car are paid off': I have $1 million in stocks — so where do I invest $100,000? 'I recommend taxpayers at least file an extension rather than miss the deadline altogether,' Steber said. Getting an extension ensures a filer won't face late-filing penalties, but if they have a balance due and don't pay at least 90% of their bill, they will face a penalty, he said. 'An extension doesn't give someone more time to pay, just more time to file,' he added. Americans have filed more than 100 million income-tax returns since late January, according to Internal Revenue Service statistics through early April. The tax collector is expecting to have more than 140 million income-tax returns once the dust settles after April 15. That would mean there are millions of people dashing to file their taxes right before the deadline. But an IRS deadline isn't just any deadline — there are pitfalls and penalties for people who move too fast or blow it off entirely. Here's what to know: Getting an extension buys people six more months to file their income-tax return. This sets an Oct. 15 deadline to submit the return, but it does not extend the deadline to pay a tax bill. The IRS says there are several ways to seek an extension, including requesting one through the IRS Free File program. Filers should estimate how much they owe and file the extension request by Tuesday to get the extra time. (Though the Free File program has an income limit of $84,000 for filing returns, there are no income rules for filing an extension through the site.) Another option is to use the IRS payment portal and click 'extension' as the payment reason; the IRS says it will send a confirmation, and extra forms don't have to be filed. Filers can also send in Form 4868 — the document seeking the extension — through the mail via a tax preparer or tax software. There's a chance a hard copy of doesn't reach the IRS by the Tuesday deadline. It's the postmark date that's crucial, according to Nerdwallet NRDS. Hold onto a proof of mailing for your records. 'When you submit that extension, make sure you also make a payment of what you expect to owe to avoid penalties and interest,' said Andy Phillips, vice president of the Tax Institute at H&R Block HRB. While some programs like IRS Free File allow people to request an extension for free, the cost can vary depending on the software, Phillips noted. Generally speaking, electronic filing is the fastest way to get through to the IRS instead of mailing paper forms. That's true for extension requests and income-tax returns overall. Some tax preparers have been moving quickly to request extensions this year or trying to avoid them altogether. The Trump administration is seeking to add to its already massive cuts to IRS staff, and these preparers want to avoid any delays in their clients' returns resulting from the agency's reduced capacity for operations and processing. That's especially true for clients mailing in hard-copy returns, they noted. 'We anticipate key operations will be stable through the remainder of tax season, but cannot predict staffing beyond the April 15 deadline,' Phillips said. It's especially important for people expecting a refund to file electronically this year, as that will be the fastest way to get the refund, he noted. Not everyone who needs more time for taxes needs to apply for an extension. The IRS routinely extends deadlines for people affected by natural disasters. After wildfires ravaged Los Angeles County in January, residents were given an Oct. 15 filing and payment deadline for their federal and state income taxes. The consequences of filing a tax return late are stiff — tougher, even, than those for failing to pay taxes. The failure-to-file penalty is 5% of the tax due 'for each month or partial month the return is late,' according to the IRS. The penalty builds by 5% each month to a maximum 25%. Getting an extension avoids the failure-to-file penalty. The nonpayment penalty is far less severe, at 0.5% of the unpaid tax. This penalty also increases as the unpaid tax drags out, but it doesn't escalate as quickly. It climbs by 0.5% increments each month. If someone skips filing and paying, both penalties apply, though the nonpayment penalty gets subtracted from the larger nonfiling penalty. Submitting the extension request by tomorrow helps people avoid the late-filing penalty, said Barbara Weltman, author of 'J.K. Lasser's 1001 Deductions & Tax Breaks 2025.' 'There's zero downside to filing an extension,' she said. At this point, people shouldn't rush to file a tax return without claiming all eligible credits and deductions — and gathering all the necessary documentation — just to make the April 15 deadline. For example, teachers should track down all their unreimbursed expenses for a deduction that's worth up to $300, along with receipts to back up the costs. Gig workers should hunt the records for their work-related expenses, which can produce deductions that lower taxable income. Investors should wait for all their tax forms reporting their gains and losses. In other words, file an extension and take the time to be complete and accurate, tax professionals say. One incentive to get your tax return right is the opportunity to maximize any refund you might receive. The average refund is now $3,116, according to the IRS, which is slightly higher than it was last year. Another incentive is avoiding notices of underreported income, dragged-out return processing and even the chance of an audit. As the Trump administration shrinks the IRS, it's unclear how much of the Biden-era plans to audit businesses and wealthy taxpayers remain. But the IRS has automated systems to check that people are reporting all the tax forms the agency receives too. These computer-powered checks aren't going away, and may take a bigger role in enforcement with a smaller IRS workforce. If someone filed their return and then realized they made a mistake or overlooked tax breaks or income, they can file an amended return. This is done with what's called Form 1040-X. The IRS will arrange repayment plans for people who cannot pay their full bill by Tuesday. There's a short-term plan under which the bill is fully paid in 180 days. There are also longer-term installment plans. Both plans can be started online, via phone or in person. The longer-term plan has some fees associated with the setup. 'Though interest and late-payment penalties continue to apply to the unpaid balance, the failure-to-pay tax penalty rate is cut in half while an installment agreement is in effect,' Phillips said. 'In addition, entering into an installment agreement will pause the IRS from taking other enforced collection actions.' People who owe taxes may still have ways to shave costs, which can help in a high-interest-rate economy. One maneuver is getting a loan to repay the IRS, Phillips said. 'In some cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law.' I begged my adviser to sell amid the market turmoil. He dragged his feet and I lost $20,000. Do I have any recourse? 'Are we out of our minds?' My husband and I are in our 70s. Should we use $600K of our savings to buy our dream home? S&P 500 tallies its first 'death cross' in 3 years. Here's what happens next. 'The whole thing feels predatory': My grandma, 97, pays $170 a month for a $10,000 life-insurance policy. Should we stop payments? I'm administrator of my sister's estate. Her bank won't tell me the names of her beneficiaries. Is that legal? Sign in to access your portfolio
Forbes
16-04-2025
- Business
- Forbes
What To Do If You Missed The IRS Tax Filing Deadline 2025
What to do if you missed the tax filing deadline Missing the tax filing deadline is not an uncommon occurrence, and the Internal Revenue Service provides several mechanisms to help you get back on track. This article outlines the essential steps you should take if you failed to file taxes on Tax Day. The IRS imposes a significant penalty for failing to file your tax return on time. This penalty is calculated at 5% of the unpaid taxes for each month or part of a month that the return is overdue, up to a maximum of 25%. If your return is more than 60 days late, the minimum penalty can be either $510 or 100% of the unpaid tax, whichever is less. The best way to reduce or avoid this penalty is to file your return as quickly as possible, even if you cannot afford to pay the full amount you owe. Doing so stops the failure-to-file penalty from accruing further and potentially reduces future enforcement actions, including wage garnishment or levies. Importantly, the act of filing demonstrates a willingness to comply, which may work in your favor when seeking penalty abatement or negotiating a payment plan later. E-filing is the fastest and most secure method of submitting your tax return. You can use the IRS Free File system or a third-party tax preparation software, depending on your income and the complexity of your return. If your return is more than three years overdue, be aware that the IRS may have already filed a substitute return on your behalf using information from your W-2s and 1099s. These substitute returns often result in higher tax liabilities because they do not account for deductions or credits you may be eligible for. The failure-to-pay penalty is a distinct charge from failure-to-file and accrues separately. It is assessed at a rate of 0.5% of the unpaid tax per month up to a maximum of 25% of the total tax owed. This penalty is in addition to the interest that compounds daily on the outstanding balance, calculated at a rate set quarterly by the IRS. Therefore, it is crucial to pay as much as you can, as soon as possible. Even partial payments can reduce the accrual of penalties and interest. If possible, pay your balance due in full using IRS Direct Pay or through your tax preparation software. Direct Pay is a service that allows you to transfer funds directly from a checking or savings account without additional fees. If you are using professional tax software, most platforms also integrate secure electronic payment options, including bank transfers and credit/debit card payments. Note that if you use a credit card, you may incur processing fees and potentially high interest rates from the card issuer. You should also retain records of your payment confirmation, as it may be needed for future correspondence with the IRS or your tax advisor. Even if you cannot pay your entire tax bill, making a substantial partial payment immediately can help limit the financial consequences. Any amount paid reduces the principal balance upon which penalties and interest are calculated. The IRS offers several mechanisms for deferred payment: • Short-Term Payment Plans If you can pay the full amount within 120 days, you may apply for a short-term payment plan. This option does not require a formal agreement and generally avoids setup fees. To qualify, your total balance (including taxes, penalties, and interest) must be less than $100,000. Applications can be submitted online via the IRS website, by phone, or by visiting a local IRS office. Approval is generally quick, especially for online submissions. • Installment Agreements For longer repayment periods, you can apply online or by filing Form 9465, Installment Agreement Request. These plans are generally available if you owe less than $50,000 in combined tax, penalties, and interest and have filed all required tax returns. Monthly payments can be made via direct debit, payroll deduction, check, money order, or credit card. Direct debit is highly recommended because it reduces the risk of missed payments and is a prerequisite for lower setup fees. • Offer In Compromise In cases of significant financial hardship, you may qualify for an OIC, which allows you to settle your tax debt for less than the full amount owed. Eligibility is based on a detailed analysis of your income, assets, expenses, and ability to pay. You may use the pre-qualifier tool on the IRS website to gauge your eligibility. Remember, while an OIC can provide substantial relief, it is not a quick fix. The application process can take months, and many offers are rejected. Therefore, it is essential to consult a tax professional with experience in IRS negotiations before pursuing this option. A qualified advisor can help assess your eligibility, prepare accurate documentation, and maximize the likelihood of acceptance. If this is your first time missing a filing or payment deadline, you may be eligible for the IRS's FTA program. To qualify, you must have no penalties for the three prior tax years, have filed all required returns (or filed a valid extension), and have paid or arranged to pay any tax due. This abatement is available for one tax period only. When requesting FTA, ensure that you meet all the criteria before contacting the IRS. While the process can often be completed over the phone, more complex cases may benefit from a written request that includes an explanation of your prior compliance history. If you are not eligible for FTA, you may still qualify for penalty relief if you can demonstrate reasonable cause. Common grounds include serious illness, death in the family, natural disasters, or an inability to obtain critical records due to circumstances outside your control. The IRS evaluates reasonable cause on a case-by-case basis, considering the facts and circumstances of each situation. To apply, you must submit a detailed written statement explaining what happened, when it happened, and how the event impacted your ability to comply with tax requirements. Documentation such as hospital records, death certificates, insurance reports, or third-party affidavits can be instrumental in establishing credibility. The IRS communicates with taxpayers primarily through written notices, and these letters serve as the official method of alerting you to outstanding balances, missing returns, potential penalties, and impending enforcement actions. Common notices include CP14, which notifies you of a balance due; CP501, a follow-up reminder that your tax debt remains unpaid; and CP504, an urgent notice warning of imminent collection actions such as levies. Each notice contains vital information about your tax account, including the type of issue, the amount owed, the due date for resolution, and instructions for responding. Failing to respond may lead to enforced collection activities, such as wage garnishments, bank levies, or federal tax liens. These consequences not only compound your financial difficulties but may also negatively affect your credit rating and future financial opportunities. Therefore, it is imperative that you read every notice carefully, understand its implications, and act on it promptly. Organize your correspondence in a dedicated folder and take note of deadlines or response instructions included in each notice. If you are unsure about the meaning or accuracy of any portion of a notice, seek clarification as soon as possible. If you are dealing with multiple years of unfiled returns, significant outstanding balances, or IRS enforcement actions, you can benefit substantially from expert guidance. A certified public accountant, enrolled agent, or tax attorney has specialized knowledge of tax law and IRS procedures and can help you navigate complex matters including audits, negotiations, and penalty mitigation strategies. Their assistance ensures accuracy in filing and provides a layer of protection for your legal rights and financial interests. You can use the IRS Directory of Federal Tax Return Preparers for verifying a professional's status and locating advisors in your area. To ensure this doesn't happen again, stay organized and start early to optimize your tax planning. Keep a dedicated folder where you store your tax documents throughout the year, such as W-2s, 1099s, and deductible expense receipts. This helps streamline the process when it's time to file. Start your tax preparation by February or even earlier to give yourself ample time to gather information, fix errors, and consult with a tax professional if needed. Use digital reminders and calendar tools to stay on top of key dates like the April 15 filing deadline and quarterly estimated payment deadlines. If you think you need more time to file, submit Form 4868 for a six-month extension but note that it does not extend the time to pay. Estimate and pay as much of your tax bill as possible by the original deadline to avoid penalties. Missing the tax filing deadline is not the end of the world. The key is to act quickly, stay organized, and take advantage of the resources and programs the IRS provides. In doing so, you can minimize financial damage and set yourself on a path to long-term compliance. If you're uncertain where to begin, speak with a qualified tax professional to evaluate your unique situation and guide you through the next steps.
