Penalty for Underpayment of Estimated Tax & How To Avoid It

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If you earned money through self-employment but didn’t pay estimated taxes, you may find yourself looking at an IRS penalty for underpayment. Here’s what causes a tax underpayment penalty and what you can do to avoid penalties in the future. What is the IRS Underpayment Penalty? Although you file only one tax return each year, … Read more

Effective vs Marginal Tax Rate: How to Estimate Your Tax Bill

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In this article we explain the difference between marginal tax rate and effective tax rate. Learn what each is used for and gain a clear understanding about how much of your income is truly expected to be paid by the IRS. What is the Effective Tax Rate? Calculated by dividing your total tax liability by … Read more

Foreign Income Taxes Explained

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People often joke about creating offshore accounts to hide money from the taxman, but the IRS isn’t laughing. In reality, Uncle Sam has an incredibly long reach and no qualms at all about collecting foreign income taxes from money Americans earn abroad. Here’s what you need to know if you’re earning income both in the … Read more

Additional Child Tax Credit: What is It & Do I Qualify?

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It’s a parents job to support their children, and doing so isn’t cheap. In 2015, the U.S. Department of Agriculture reported that raising a child to the age of 17 costs about $233,000. This figure doesn’t take college tuition into account.  Fortunately, the IRS understands that children are amazing but expensive creatures. To help offset … Read more

Why is my tax return so low? 2020 Tax Year Edition

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So you went the DIY route and your tax refund is lower than you expected. Your first step is likely to verify that the information you entered into your tax software is correct. If it is, you may have fallen victim to one of several common scenarios that lead to tax refund surprises.  Reasons Why … Read more

How to Calculate Quarterly Estimated Taxes for 2021-2022

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You may have heard us mention before that the federal income tax is a pay-as-you-go tax. As the name implies, this means that you pay your taxes as you earn income. This is why your employer withholds federal taxes from your paycheck every week. Self-employed people, however, don’t have an employer to withhold taxes for … Read more