Recently, many people have taken up freelancing. Working on a freelance basis gives the comfort of working from home. The number of freelancers is steadily on the rise across the globe. No wonder that freelancing opportunities are increasing with higher payrolls. Though, the nature of work is flexible for the freelancers, but, it is not very different from working full time. Also, whether it is a 9-5 job or a freelancing stint, paying taxes is one of the most significant aspects of earning a living. However, many freelancers tend to not pay taxes and file returns. It is essential to pay taxes whether you are a working individual or you are self-employed. Here are some tax-related mistakes that freelancers often make. By avoiding these mistakes, you will avoid being hit by penalties by the IRS. Failure to pay self-employment tax: This is one of the most common and critical mistakes that freelancers often make. The failure to pay tax may have repercussions in the future. A freelancer has the advantage of receiving their income without any taxes deducted from their salaries. It is essential for freelancers to pay self-employment tax which covers Medicare and Social Security taxes. Unorganised finances: Often freelancers make the mistake of using their business income for their personal requirements.

Every person dreams of owning a house someday. However, owning a house requires applying for loans and mortgage. Once approval for loans and mortgage is received, new homeowners have to start the process of re-payments. Although these re-payments are often liabilities, they can also qualify new homeowners for several tax breaks. This reduces the tax liability. However, these tax liabilities are not deducted from the taxable income of homeowners by default; instead, homeowners will need to claim these deductions in their tax filing. These deductions can help a lot in reducing tax liability, which in turn means that the money saved can be put back into the loan repayments. Here are 4 useful tax deductions. Property Tax Any real estate that you buy will attract property tax. For a first-time home buyer, when the real estate has been made with a loan, the property tax to be paid for a particular year is collected in advance by the lender along with regular loan repayments. These monthly payments are set aside by the lender and paid once a year. If your home loan has this kind of arrangement, the property tax payments made by you are eligible for tax deductions. Mortgage Insurance For all home loans for which the down payment paid by the borrower is less than 20% of the loan amount, a private mortgage insurance needs to be paid.

After working for nearly all their lives, most people look forward to a peaceful and hassle-free retirement. The lack of deadlines and work pressures does make things easy for retirees, but the flip side of a retired life is that the income reduces drastically. Also, if the state where you have retired to has unfriendly tax laws, then your savings will be further impacted. Hence, it is best to move to states that have the lowest taxes for retirees. The following are the states that have the lowest retirement tax burden. Alaska: Irrespective of the warm weather that most retirees comprehensively consider a strong parameter while retiring, one of the major indicators for individuals to move to this state is the lenient tax policies. An exemption from retirement income tax is an additional impetus with over 24 of the 164 municipalities levying a property tax, which makes Alaska a fairly good choice for retirees. Also, there is an additional provision of no or low sales tax along with the rule that residents older than the age of 65 amongst the 24 communities mentioned above are exempted from property-based taxes as well, based on their home’s assessed monetary value after a fixed slab.

Making mistakes with tax returns is not uncommon since the process of filing is complicated and sorting out taxes for one financial year takes a lot of calculations. It comes as no surprise that most people take the help of tax experts to file their taxes to avoid any issues with the IRS. However, errors may occur while filing returns despite taking precautions. Here are some of the common mistakes that may occur during tax filing. Waiting until the last minute: Waiting until the last minute to pay taxes leads to a delay in refunds. According to the IRS, almost one-third of Americans wait until the very last minute to file their tax returns. This last-minute filing leads to late processing and results in delayed tax refunds. Filing returns on papers: It has been proven that taxpayers who file their taxes on paper make more mistakes as compared to individuals who go for e-filing. Calculation mistakes are also commonplace in worksheets that have to be attached to the tax form. Hence, the IRS recommends taxpayers to file their taxes online and avoid delays in the processing of refunds. You Might Also Like :   6 Things That May Happen If You Don’t Pay Your Taxes Making calculation mistakes online:

Federal taxes are uniform across the country. However, taxes imposed by states varies throughout the country. Thus, some states impose a limited number of taxes on the residents, while others impose quite heavy taxes. Based on this, there are the least tax-friendly states and best tax-friendly states. If you are relocating, it is essential to know which states impose more taxes and which states impose the least taxes. This is because the taxes will impact your overall financial health. Here is a list of the top 10 tax-friendly states in the country. Some of the names and rankings may very well surprise you. Wyoming: In this state, there is no income tax and taxes on gas are below the average threshold price of the country. It also has the lowest beer tax, and it’s the 9 th lowest in terms of property taxes. Alaska: This is one state where there is no gas or income tax charged at all. The average sales tax is reportedly 1.76%. Each legal resident gets a Permanent Dividend Fund after a year of staying here. South Dakota: Another state that has no income tax. Also, if you add all the sales taxes, it is much lower than the rest of the country.

After filing their tax return, many wait for their refund check. Tax refund checks are usually received within three weeks of filing the returns. The average amount received by most people is about $3000. This is a substantial amount of money that can be put to good use. Here are 13 different ways to use tax refund money smartly. Pay off accumulated debt: Paying off the interest or any penalties on your credit card debt is a good way to use your tax refund money. You may also use this money for other debts that you may have incurred. Invest in your child’s future: If you have a child, your tax refunds can be invested in a 529 plan, which is an account free of federal taxes to help reduce the burden of student loans. This can help in your child’s higher education. Home repairs : If a home appliance like your fridge or washing machine suddenly breaks down, you can use your tax refund to carry out repairs or purchase a new appliance. You can also use this money to make repairs in damaged plumbing or electrical fittings of your house. Save it for a rainy day: You can start building up an emergency fund for unforeseen expenses.

While most people regularly meet their tax obligations, there are always a few who may discreetly evade their taxes. Non-payment of taxes falls under tax non-compliance; activities such as tax avoidance, tax reduction through legal means, and tax evasion (also called as the criminal non-payment of tax liabilities) come under tax non-compliance. Along with these unfavorable activities, misreporting is also a major aspect of tax non-compliance, which is covered by US laws. It is necessary to be aware that tax non-compliance may lead to a sudden rise in unreported income and cause a tax gap. You Might Also Like :   22 Most Overlooked Tax Deductions If you are a business, tax non-compliance can lead to serious consequences such as a change in your company’s legal status, which can be detrimental to your business. This can expose your business to lawsuits, audits by government agencies, and the imposition of fines or even dissolution of your business. The following are the six effects of tax non-compliance: If you do not file your income tax returns, you will be charged a penalty of 5% of the unpaid taxes charged for every month that your returns continue to be pending. If the delay exceeds two months, the penalty gets converted into a fixed amount of $135, or 100% of the unpaid taxes, whichever is lower.

The latest corporate tax reforms is a meticulously curated idea to ensure that the money that many stash away across the globe comes back home. There has been a drastic tax deduction of the corporate-tax rate; it has fallen from 35% to 21%. Not only does this move bring corporate tax below the rich-country average but also ensures that the money earned by the country’s corporate remain in the country. Due to the high tax rate, American businesses have been affected in several ways with respect to jobs, money, profits, and tax revenues overseas. Companies with a big overseas presence have had a good run of evading taxes they would otherwise have to pay if the money enters the country. However, with the latest drop in the corporate tax rates, its primary implication is territorializing the American business by bringing back billions of dollars earned abroad at a lower rate. Other implications also include the necessary boost for domestic businesses that will see growth. Another add-on to this bold move is a reduction in the tax that the companies must pay for foreign profits, which is as low as 15.5%. However, there is a catch here. While earlier, businesses had to pay tax for the money that entered the country, now they’ll have to fork out and pay tax on all the foreign cash earned.

Retirement can be a little hard on your bank accounts considering the excessive tax rates prevalent in most states. Hence, when looking for a place to reside after retirement, it is necessary for retirees to find states that don’t charge any taxes on social security. Not just low taxes on social security, but there should be low income, sales, and property taxes too. A marginal deduction can be managed easily. However, higher tax rates can make it difficult for you to manage your daily finances. So, while you are house-hunting for the right state to settle down in, try avoiding these seven states since they are known to be the least tax-friendly states. Connecticut: The income tax rate here is between 3% and 6.99%. The average sales tax is 6.35%. The average property tax is 1.97%. There has been a recent alteration in the method of taxation in Connecticut. Earlier, only extra income such as dividends was taxed. However, with the change in tax laws, even salaries are being taxed at a minimal rate ranging between 3% and 6.99% depending on the tax bracket you fall under. Minnesota: The income tax rate here is between 5.35% and 9.85%. The average sales tax is between 6.87% and 8.37%.

As it is widely understood, getting tax refunds has a negative impression on your financial management as it shows that you overpaid on your taxes during that particular year. Despite this, most individuals look forward to tax refunds, as evident from the statistics; over 80% of taxpayers receive a refund with a massive amount of $2,872 per filer. After getting refunds of such substantial amounts, people have come up with ways to utilize their refunds efficiently. Here are some of the popular ways that have been observed for people to use their tax refunds. While some people may decide pay back debts or opt to purchase luxury goods, some may put the refunds into their saving accounts. Tax refunds cannot be considered as free money since these are like interest-free loans that an individual unintentionally chooses to give to the government for some time. With a majority of Americans opting to save, statistics quote that over 57% of working adults have less than $1,000 in their banks while a whopping 39% have no savings at all. Also, it has been observed that nearly 43% the people who receive tax refunds plan to put this money in their savings. These savings are used by many for unplanned expenses.

So many things change for a person after retirement. There will be neither a regular job nor a regular income. But there will be a lot of time to meet friends, read books, take up a hobby, or travel to new places. Thus there will be a lot of leisure time to do everything that was put on hold due to jobs and other responsibilities and obligations. Apart from these major changes, there are other things that will change as well once you retire. One of these changes is how your tax will be calculated after retirement. You need to be aware of how exactly the current tax regime works for retirees. Here are a few ways your tax would change once you retire. Recharacterizations of IRAs will no longer be permitted, as they used to be earlier. If you are a retiree and have decided to convert your IRAs into Roth IRAs, then the rolling back of this decision will not be permitted. You need to decide before the end of the financial year how you will use the IRA. Contributions to charity would draw tax relief for retirees . Also, now the contributions will need to be made two times every two years.