March 2023 - Mercer Savings Bank

This article has been updated for 2023. Confused about taxes? You’re not alone.Here’s a look at a few common tax questions that many people find themselves too embarrassed to ask — but are totally valid! Can the IRS really hold my refund?Yes, the IRS is allowed to hold your tax refund in certain cases. Some common situations in which the IRS can hold a refund include:When you’re behind in paying federal student loansWhen you have unfiled or missing tax returns from previous yearsWhen you’re behind in paying child supportWhen you’re behind in paying state income taxesWhen you have received too much subsidy to pay toward health insurance that is found through a federal or state exchangeIf this happens to you, the first step is to research your IRS account. There, you will be able to find information on your account status. Then, it may be a good idea to contact a tax professional for advice on how to move forward.Related: New Homeowners: 3 Tax Benefits Not to MissDoes everyone get audited by the IRS?No, not everyone gets audited by the IRS. In filing your personal taxes, your chances of getting audited are slim.However, if you own your own company, there is a greater chance you will be audited. People who own their own businesses tend to claim multiple tax breaks. To ensure these breaks are legitimate, the IRS will audit them.This doesn’t mean every business owner gets audited each year, but if you are self-employed, your audit risk is much higher than regular employees.What about people who are employees but make a little money on side jobs? That leads us to our next common tax question.I made some money outside of work. Do I have to report it?Yes. Earnings from a second job or side gig must be reported on Form 1040 at tax time.This holds true even if the earnings seem minimal to you. Certain income amounts also require a special form. If you did some freelance or contract work and earned over $600, whoever paid you will usually need to provide you with Form 1099-MISC.Also, if you sell crafts or products on online platforms like Etsy, you will need to pay taxes on that income as well.Should I still file my taxes if I owe money and lack the means to pay it?Yes, you should always file your taxes. The number one reason for filing is because it is the law. As long as you show that you are making an effort to keep your taxes current and pay back any that you owe, the IRS is usually fairly simple to work with in relation to repayment terms.Speaking with a qualified tax accountant can be of great benefit. If you decide you’re not going to file, be aware that you will receive a failure-to-file penalty. This penalty can be very costly.If you find that you owe more than $10,000 in taxes, hiring a tax attorney is advised as this will provide you with representation when setting up a repayment plan with the IRS.Related: Explore tax-deferred retirement savings options from Mercer Savings BankDo college students need to pay taxes?Yes. You will still need to file state and federal returns as a college student if you owe taxes, which is determined based on your age, income and filing status. Your status as a full-time student doesn’t exempt you from federal income taxes.For 2023, you must file a tax return if you are under the age of 65, single and earn $12,950 or more.Can I pay my taxes in installments?Yes, the IRS offers payment plans, an agreement between you and the IRS to pay what you owe on taxes within a set timeframe. Your specific tax situation will determine your eligibility.However, you should note that if you choose a payment plan longer than 120 days, certain fees will be applied. Read more about IRS payment plans here.Getting Your Tax Questions AnsweredIf you have more questions about your specific tax situation, talk to a tax professional. Everyone has a unique tax return, and having an expert help you with your return can be very beneficial.When consulting a tax professional, don’t be embarrassed to ask questions. Chances are, they’ve heard it before and will be happy to provide you with the answers you need. For more financial tips, read our blog or follow us on Facebook. We’re here to help!Finally, as you’re planning for next year’s taxes and beyond, be sure to learn more about tax-deferred Individual Retirement Accounts (IRAs) from Mercer Savings Bank. Taxes are constantly changing. While this blog is meant to help you best manage your finances, it’s for informational purposes only and shouldn’t be seen as tax advice. Talk to your tax professional if you have questions about your taxes.