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FAQ

What is the earned income tax credit?
The Earned Income Tax Credit, EITC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund.To qualify for EITC you must have earned income from working for someone or from running or owning a business or farm and meet basic rules. You must either meet rules for workers without a qualifying child or have a child that meets all the qualifying child rules.Qualification for EITC depends on filing status, number of children and income. (2021 amounts shown here)Single, Head of Household or Widowed# of Children-Income Limit0-$14,5901-$38,5112-$43,7563 or more $46,997Married Filing Jointly# of Children-Income Limit0-$20,0201-$43,9412-$49,1863 or more-$52,247Income limits apply to both earned income and adjusted gross income.Investment income must be no more than $3,350 for the year.The maximum amount of credit for Tax Year 2021 is:$6,143 with three or more qualifying children$5,460 with two qualifying children$3,305 with one qualifying child$496 with no qualifying childrenQualifying Child RulesYour child must have a Social Security Number that is valid for employment and must pass all of the following tests to be your qualifying child for EITC: RelationshipYour son, daughter, adopted child, stepchild, foster child or a descendent of any of them such as your grandchildBrother, sister, half brother, half sister, step brother, step sister or a descendant of any of them such as a niece or nephewAgeAt the end of the filing year, your child was younger than you (or your spouse if you file a joint return) and younger than 19At the end of the filing year, your child was younger than you (or your spouse if you file a joint return) younger than 24 and a full-time studentAt the end of the filing year, your child was any age and permanently and totally disabledResidencyChild must live with you (or your spouse if you file a joint return) in the United States for more than half of the yearJoint ReturnThe child cannot file a joint return for the tax year unless the child and the child's spouse did not have a separate filing requirement and filed the joint return only to claim a refund.
What’s the maximum number that you can claim on your W4 to break even and not owe any taxes next year?
Let’s be clear here:A W-4 form is NOT A TAX BILL. It has NOTHING to do with how much taxes you owe.All the W-4 does is insure that sufficient money is withheld from your paycheck to cover the tax debt you will owe that year. Whatever you put on the W-4 will have no affect whatsoever on the actual tax liability you have.How your tax liability (i.e. the total amount of money you much pay in income tax to the IRS) is dependent on a whole host of other things.What the W-4 provides is nothing more than a “guess” as to what this tax liability will be, so that the proper amount of money is regularly withheld to cover this liability. If you don’t properly withhold during the year (i.e. make regular proper-sized payments), you can assessed a fine by the IRS.How you compute the number of exemptions for the W-4 is completely dependent on your own tax situation, and cannot in any way be generalized to pra generic answer. All you are doing with the W-4 is trying to eso that the amount that you’ve had withheld during the year closely matches your tax liability come April 15th.
What is the difference between TDS and Form -16?
What is TDS or Tax deducted at source?Tax deducted at source (TDS), as the very name implies aims at collection of revenue at the very source of income. It is essentially an indirect method of collecting tax which combines the concepts of “pay as you earn” and “collect as it is being earned.” Its significance to the government lies in the fact that it prepones the collection of tax, ensures a regular source of revenue, provides for a greater reach and wider base for tax. At the same time, to the tax payer, it distributes the incidence of tax and provides for a simple and convenient mode of payment.The concept of TDS requires that the person on whom responsibility has been cast, is to deduct tax at the appropriate rates, from payments of specific nature which are being made to a specified recipient. The deducted sum is required to be deposited to the credit of the Central Government. The recipient from whose income tax has been deducted at source, gets the credit of the amount deducted in his personal assessment on the basis of the certificate issued by the deductor.What is Form 16?Every year your employer will issue this document. It is a certificate under section 203 of the Income-Tax Act, 1961, which gives information on the tax deducted at source (TDS) from income chargeable under the head “salaries”. Simply put, it gives details of the tax deducted by the employer. If you have not received your Form 16, you can use the worksheet that the income tax (I-T) department provides to calculate and declare the amount
Why should I live below my means when I am young? Why shouldn’t I enjoy life when I am young rather than live comfortably when I am old and retired?
You don’t need to, many don’t. Go ahead and live for today, borrow as much as you can, and hope that next year you’ll make more money and finally start to pay down the debt. Go to college and take out as many student loans as possible‡ borrow for beer and chips, and worry later about the debt.Graduate with $100,000 in student loan debt, start a $60,000 a year job and go lease a car. Take a few vacations to visit old college friends, and spend money to impress them. Marry someone who has $125,000 in student debt and that makes less than you. Lease another car. Decide that renting is a waste and go by a home. Borrow right up to the limit, but go for the variable rate loan as it’s cheaper to start with and you’ll be making more money in a few years anyway.Then the economy tanks‡ you loose your job, you have $800 in your checking account, the interest on your house loan doubles and you can’t pay your mortgage. You try to refinance (your broker told you you could, but now he won’t call you back). Your lease cars can’t be returned without a huge check to buy out early and you learn that you’ve put too many miles on them anyway.You start considering bankruptcy and then someone points out all that student loan debt can’t be disc hared. You are screwed.Now you’re 40, you’ve got a pile of debt, a puny 401K (Hey, you were young, retirement savings can wait) and life just got really bad…The next 40 years should be a hoot…. we’ll, the last 30 years will be, because it will take you 10 years living on nothing to pay off the debt and to save a tiny amount to get you though 15 to 20 years of retirement. Living off $2,000 a month social security won’t go far, unless you like public housing and cat food.
How would libertarians approach tax reform?
First, I object to all taxes on moral grounds. They are theft. Stolen money has a way of tainting all it touches. Yes, that’s a bit esoteric, but it sure seems to in practice. The “invisible hand” is a measurable quantity of shared increase that only happens by the act of voluntary, fully-informed, exchange of value. Taxes (in the US) are not voluntary, they are not fully-informed transactions (think “withholding”,) and they are actually an exchange of debt.Income taxes are the worst possible kind of taxes. They have no place in a supposedly free society. There is simply no way to collect or enforce income tax without some government agency having its nose in all transactions and financial records, and fingers on many. That is the opposite of “secure in papers and effects.” That’s how we have a federal agency that is not constitutionally authorized but whose de facto powers exceed all elected representatives.Worse, income taxes are used as an instrument of social control. That’s what all those exemptions, deductions, and credits are for—this year, Congress wants you to behave this way and not that way. We can choose to act otherwise, but why should we pay the federal bribe to act with individual liberty?If we admit to a need to fund some collective services (defense, courts, etc.) by taxes, then the act of that theft should be as quick and painless as possible, with no chance for venal manipulation and no reason for Gestapo-like collection. Here are a few ideas.Poll tax - not very good, but it’s constitutional. Each state pays the federal government $xx for each person in that state. Each state collects separately. As I said, not very good.VAT or consumption tax - Right now we tax workers. (Soc. Sec. for instance.) Changing to a sales style tax would increase the value of labor relative to machines, as now the latter would be taxed rather than depreciated and the former could be depreciated rather than taxed. It requires zero individual record keeping. It does however make all businesses tax collectors, so it’s still far from perfect.A Forbes-style “flat tax.” If we absolutely feel we must keep taxing income. The truth is that “money-in - compute-stuff - collect x%” is a simple math construct and that the middle term can simply be eliminated, and still retain some “revenue neutral” tax picture. We don’t need exemptions, deductions, credits, depreciation, etc.Even less radical, but effective ‡ change the rules for capital gains, and for deductions. First, make all deductions available to businesses (retirement, travel, medical, taxes, entertainment, clothing, equipment, etc.) also available to individual human taxpayers. Only one set of rules where we don’t steal from people to subsidize business. Second, make the capital gains tax time sensitive. The less time you hold an asset, the greater your tax rate. The stock and commodity markets are supposed to be providing liquidity, not funding high-tech gambling schemes. Pick some reasonable time, let’s say 6 months. Hold an equity that long and tax is 20%. Hold it twice as long and tax is 15%, 10% for 18 months, 5% for two years, and 0 after that. Going the other way, hold it for 3 months and it’s 25%, 6 weeks is 30%, 3 weeks is 35%, ‡ 15 minutes is 80%, 4 min is 90%, 1 min or less is 100%. This eliminates high-speed trading and the gross market distortions is causes. It also promotes long-term investing.In short, there is a lot we could do to clean up federal taxation in the US. Don’t hold your breath. I fully expect to see the same Titanic thrown at us with an only mildy-rearranged set of deck chairs on the Lido deck.
What is the meaning of income tax returns and what is its importance?
What is Income tax returns?According to rules and regulation of India tax system filing of income tax is very important and mandatory in India and in case of failure of filing of Income tax return you may have to face legal consequences of it. Basically Income tax return is a statement of income and tax thereon, which should be paid by the income tax payer to the Income tax department of India. Process of Income tax return is very easy and simple and now you can file your income tax return online in India. This article talks about the filing of Income tax return online in India so you will get an idea about the online filing of Income tax return.ITR is a statement of income across different sources, tax liabilities, the tax that has been paid and the exemption that the government is supposed to give. Filing of Income tax return is important because its provides proof of your income as legal and disclosed so in future it not calculated as black money. If you file your income tax return then you will get loan easily and filing of income tax return has many benefits. If you are gross income is more than rupees 2.5 lakh then you have to file your income tax return. To Know more about Income Tax Return Check the same.5 Reasons Why You Should File Income Tax ReturnsA lot of individuals seem to think that filing tax returns is voluntary and therefore dismiss it as unnecessary and burdensome. As we will see, this is not a very healthy perspective on tax-filing.Filing tax returns is an annual activity seen as a moral and social duty of every responsible citizen of the country. It is the basis for the government to determine the amount and means of expenditure of the citizens and provides a platform for the assesse to claim refund, among other forms of relief from time to time.Filing returns is a sign you are responsible The government mandates that individuals who earn a specified amount of annual income must file a tax return within a pre-determined due date. The tax as calculated must be paid by the individual. Failure to pay tax will invite penalties from the Income Tax Department.Those who earn less than the prescribed level of income can file returns voluntarily.Filing returns is a sign that you are responsible. Not just that, it also makes it easier for individuals and businesses to enter into subsequent transactions since their income is recorded by the tax department with applicable tax, if any, having been paid.Filing returns is mandatory in some cases Even if your income level does not qualify for mandatory filing of returns, it may still be a good idea to voluntarily file returns. In most states, registration of immovable properties requires advancing as proof the tax returns of last three years. Filing returns makes it easier to register the transaction.Your loan or card company may want to see your return If you plan to apply for a home loan in future it is a good idea to maintain a steady record of filing returns as the home loan company will most likely insist on it. In fact, you may even consider filing your spouse’s returns if you want to apply for a loan as a co-borrower. Likewise, even credit card companies may insist on proof of return before issuing a card.Financial institutions may insist on seeing your returns over the past few years before transacting with you. In fact, the government may make it mandatory for them to do so, thereby indirectly nudging individuals to file returns regularly even when it’s voluntary.If you want to claim adjustment against past losses, a return is necessary Filing returns on time has many advantages regardless of whether you draw the prescribed level of income necessary to file returns.Various losses incurred by an individual or a business, both speculative as well as non-speculative, short term as well as long term capital losses and various other types of losses not recorded in the tax return in a financial year, cannot be shown for exemption in subsequent years for the purpose of tax calculation. So it’s best to file returns regularly, because you never know when you may want to claim an adjustment against past losses.Filing returns may prove useful in case of revised returns In case the assesse hasn’t filed the original return, he cannot subsequently file a revised return, even when he really needs to. Under the Income Tax Act, non-filing of returns can attract a penalty of Rs 5,000. So while filing returns is a voluntary activity, there are times when it could hold legal implications for those who do not do so, especially if they must file a revised return in future.I hope after reading my answer you will get know all about Income tax return and Importance of Income tax return. If you need to know more : https://www.myonlineca.in/income...
Is it possible to work and pay for college with no loans?
It is possible, but:Take a hard look at your math………..Yes, I can believe that a local Community College will only cost you $1,500 per semester or $3,000 for the year. But you have to add in books and supplies, extra cost of food and local travel costs. So, you should figure on at Least $4,500 per year for the Community College. One can work 500 hours over a Summer and net $5,000, so that is do-able.However, if your mother can not afford to assist you in paying for college, then apply for a Federal Pell Grant by you and her filling out the FAFSA forms FAFSA - Free Application for Federal Student Aid and qualifying for a free Pell Grant Federal Pell Grants That will More than pay for your Community College, and then any money you earn will go to saving for the last two years of college to earn a bachelors.You claim that your in-state Public university will cost over $50,000 per year???? You should be able to attend a top Public University in your state for $25,000 per year which includes tuition, fees, room, board, books and supplies and local travel. And, because you attended a local Community College in your state you can get a Guaranteed admission as a Junior to your state’s Public university system. Most if not all states have that, and here are two examples.Transfer Admission Guarantee for University of CaliforniaMassTransfer | UMass Amherst (Massachusetts)So, with $6,000 per Year (Free) from the Federal Government, and $5,000 per summer for four summers…. that is $44,000 and the four year cost of the bachelors degree (as described above) is $59,000. That means you Only have to come up with another $15,000 that you could take in Federal Direct Student loans. If you have only $15K in student loans and get a job earning at Least $35,000 per year after graduation, you will pay back that loan in roughly five years. One of my sons had $25,000 in student loans, got a great job and paid it all back within three years (ending last year).All the best.NOTE: I believe there was a change in the questions details, and now the cost of the four year university is $5,000 per year for tuition only. However, that just means that no loan is required.
How can I file IT return being self employed electrician with Rs. 45000 annual earning?
Greeting Friends !!!If you are going to file it yourself, then following is the procedure:-Before you start the process, keep your bank statements, Form 16 issued by your employer and a copy of last year's return at hand. Next, log on to http://incometaxindiaefiling.gov...Follow these steps:Step 1: Register yourself on the website. Your Permanent Account Number (PAN) will be your user ID.Step 2: View your tax credit statement ‡ Form 26AS ‡ for the financial year 2015–16 . The statement will reflect the taxes deducted by your employer actually deposited with the I-T department. The TDS as per your Form 16 must tally with the figures in Form 26AS. If you file the return despite discrepancies, if any, you could get a notice from the I-T department later.Step 3: Under the 'Download' menu, click on Income Tax Return Forms and choose AY 2016–17 (for financial year 2015–16 ). Download the Income Tax Return (ITR) form applicable to you.Which Income Tax Return Form Require to file or applicable F.Y. 2015–16 by Hetal M Kukadiya on Tax Knowledge Bank - IndiaStep 4: Open the downloaded Return Preparation Software (excel or Java utility) and complete the form by entering all the details , using your all documentsStep 5: Ascertain the tax payable by clicking the 'Calculate Tax' tab. Pay tax (if applicable) and enter the challan details in the tax return.Step 6: Confirm all the information in the worksheet by clicking the 'Validate' tab.Step 7: Proceed to generate an XML file and save it on your computer.Step 8: Go to 'Upload Return' on the portal's left panel and upload the saved XML file after selecting 'AY 2016-2021 ' and the relevant form. You will be asked whether you wish to digitally sign the file. If you have obtained a DS (digital signature), select Yes. Or, choose 'No'.Step 9: Once the website flashes the message about successful e-filing on your screen, you can consider the process to be complete. The acknowledgment form ‡ ITR—Verification (ITR-V ) will be generated and you can download it.Step 10: you can Verify online with EVC Pin or Take a printout of the form ITR-V , sign it preferably in blue ink, and send it only by ordinary or Speed post to the Income-Tax Department-CPC , Post Bag No-1 , Electronic City Post Office, Bangalore - 560 100, Karnataka, within 120 days of filing your return online.Its Advisable to go with CA help for filling Tax return. There are lots of amendment come in every year, to file accurate return and Tax planning benefit etc so Prefer to go with expert like CA, Tax Preparer etc…Be Peaceful !!!