You really shouldn’t be embarrassed about not understanding taxes, because really, who does? Exemptions, filing status and freelance taxes - if any of these have you scratching your head, this article will help.
1. Are there any benefits to filing early? And what happens if I file after the deadline?
The main benefit of filing before April is getting your tax refund back sooner. But filing really close to the deadline could also cost you money. “If you’re working with a CPA and you dump your tax stuff on them two weeks before April 15th,” Vient says, “most people will charge you a premium.” And doing your taxes earlier will mean that if you hit a snag like a missing form or needing to resolve a big question, you have more time to solve it.
As for filing late, you can easily ask for an automatic extension if you think you won’t be able to file on time. But if you were just being absent-minded, didn’t ask for an extension and filed after the April 15th deadline, you’ll owe the I.R.S. fines and interest, which can be a big chunk of cash.
2. What’s the difference between an exemption, credit and deduction?
Exemptions and deductions work the same way. They reduce your taxable income, which lowers your tax bill. For (a grossly simplified) example, if you take a $1,000 deduction, and you’re in the 20% tax bracket, you could save $200 on your taxes. Or if you get a $3,800 exemption, that’s about $760 less in taxes.
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