Have you filed your taxes yet? Don’t mess with Uncle Sam because your federal income tax return is due on April 18, that’s a week from today! Also, your Hawaii State tax return is due on April 20. So, what kind of tax credits or deductions are new this year?
Tax attorney Adam Brewer joined Take2 to provide some last-minute advice for filers and tax breaks that could lower your tax bill.
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Some comments from the interview:
Unfortunately, a lot of Hawaii residents will be disappointed by their tax return this year. It comes down to the pandemic stimulus that was implemented through the IRS being expired. 2022 is a return to normal for tax refunds or balances due.
Parents are the group that is most directly impacted. The Additional Child Tax Credit was passed during the pandemic to put more money in the pockets of parents. That was allowed to expire at the end of 2021 and isn’t available on the 2022 tax returns everyone is filing now.
Similarly, anyone who is self-employed or has self-employment income through a side hustle may be shocked to see they owe more money than anticipated.
This isn’t necessarily anything new, but a return to pre-pandemic normal. For parents, that means the Additional Child Tax Credit is no longer available.
For self-employed taxpayers, that means there is no more stimulus credits to pad their tax return and decrease the amount of taxes they owe. they will be back to owing taxes at year’s end. Again, this isn’t anything new. Unless self-employed taxpayers have diligently made their estimated tax deposits, they will owe at year’s end. This is because in addition to income tax, they are responsible for self-employment tax which is a 15.3% tax paid to the IRS for Social Security and Medicare. To compound their problems, they don’t have income tax withheld from their earnings like someone receiving wage income from an employee.
If viewers end up with a tax bill they can’t afford to pay, then don’t panic. There are a few options, and an experienced tax attorney or another tax professional can help you find the option that works best.
The most common solution is to set up an installment agreement. If they can pay their IRS tax bill within 72 months or their state tax bill within 36 months, then they can avoid a tax lien.