Get Right With Your Taxes
WOMAN: Taxes are the price we pay to live in the greatest nation on Earth.
Without taxes, we wouldn't have public schools, public parks, or public transportation.
We wouldn't have the streets and highways to drive on.
Without taxes, we wouldn't have the Army, the Navy, the Air Force, or the Marines to fight for us.
MAN: And that's just the tip of the iceberg.
Filing a federal tax return will help you on a personal level, too.
It'll keep you out of trouble with the IRS, and more than likely, it'll put money in your pocket.
WOMAN: All in all, I'd say those are pretty good reasons to get right with your taxes.
No one likes to pay taxes, but it's something that just has to be done.
And there's some really good things that can come from filing a federal tax return.
Good thing number 1...
I don't care if you're an employee, a contractor, or your own boss, if you pay taxes, chances are good you're going to get a refund if you file a return.
Good thing number 2...
WOMAN: Tax credits.
You may think that tax credits are only for the wealthy, but you'd be wrong.
Some tax credits are built for folks who are just scraping by.
Even if you don't pay enough taxes to get a refund, these credits can put thousands of dollars in your pocket, but only if you file a return.
Good thing number 3...
MAN: Proof of income.
If you think you'll ever want to put in an application to rent a house or apartment or apply for a loan, you'll need proof of income, and that's exactly what a tax return gives you.
Good thing number 4...
WOMAN: Social Security.
That's right -- to get Social Security benefits, you have to have a record of your work history to show your earnings.
Filing your tax return if you're self-employed is the main way to get full credit of your earnings for Social Security benefits.
Good thing number 5...
MAN: Peace of mind.
Life is complicated enough as it is.
Why leave yourself dangling in the wind as far as taxes are concerned, especially when there are so many ways to get help filing your return?
WOMAN: And here's one more reason to get right with your taxes.
If you haven't filed a return in a while and you worked at a job that took out payroll taxes during that time, you might still be able to get a refund on the taxes you paid.
MAN: That's right -- you've got up to three years to file a tax return and get your refund, and the IRS will help you do it.
Just contact the IRS and ask for any records your employer might have filed with them, like a W-2.
WOMAN: All right, now that we've got you thinking that getting right with your taxes might be a good thing, we're going to tell you how to get other folks to help you fill it out and send it in.
MAN: First of all, a lot of you may not even need help.
If you work for someone else and they take taxes out of your paycheck, they're doing a lot of the work for you.
In January, they'll send you, in the mail, a W-2, and all you have to do is use that form to fill out a 1040EZ.
They don't call it "EZ" for nothing.
It's about as basic as it gets.
WOMAN: Now, if you're a contractor, like a plumber or a carpenter, or if you own your own business, taxes can get a little complicated.
But no matter what situation you're in, you can always get help filling out your tax return.
MAN: Just about every community has groups and organizations that offer free tax help for those who qualify.
The most common one is Volunteer Income Tax Assistance, or VITA for short.
They have sites that are run by IRS partners and staffed by trained, certified volunteers.
WOMAN: Some of these sites even offer free financial counseling and can help you hook up with savings incentive programs that will give you as much as $3 for every $1 you save.
You can't beat a deal like that.
To find the VITA site nearest you, call 1-800-906-9887.
MAN: Or go to the IRS website and type "VITA" into the search engine.
Another option is to use a computer to go online and file your taxes for free using Free File.
You can get all of the details about Free File by going to the IRS website and clicking on the "Find a Free File Provider" link.
WOMAN: And, of course, you can always go to an accountant or a tax-preparation service and have them prepare and file your return for a fee.
MAN: The best place to go to get information about filing a federal tax return is the IRS website.
You can download forms...
get answers to questions...
find out where to get help...
and a whole lot more.
If you don't have your own computer, you can go to the public library and use theirs.
If you just can't get access to a computer, the next best thing is to call the IRS at 1-800-829-1040.
If you forget the number, you can always call directory assistance.
WOMAN: Let's talk a little more about those tax credits that are designed to put money in the pockets of everyday hardworking people.
The first one is the Earned Income Tax Credit, or EITC for short.
Some people think it's just for folks with kids, but it goes further than that.
MAN: Depending on how much money you earn, you could get as much as $450 from EITC, even if you don't have kids, and that's on top of whatever tax refund you might get.
That's real money and definitely makes it worth filing a tax return so you can claim the credit.
WOMAN: Now, if you do claim children as dependents and you make below a certain income level, you can get thousands of dollars from EITC.
You can't afford to pass up that kind of money.
MAN: Another credit is the Child Tax Credit.
This one is obviously for people with kids.
If you qualify, this credit will generally give you about 1,000 bucks per kid.
Definitely worth filing a tax return for.
WOMAN: Now, there are certain rules that apply to these credits.
For instance, if you're claiming a child as a dependent, you've got to make sure no one else is claiming the same child on their tax return.
MAN: Also, any money you make in a work-release program can't be used for Earned Income Tax Credit.
That's why it's a good idea to go to the IRS website and do a little research or go to a VITA site and ask for help.
The big thing to remember is, you've got to file a federal tax return to get these credits.
If you don't file, it's like throwing money out the window.
WOMAN: There is one other credit you might be interested in.
You can't claim it on your tax return, but it can put money in your pocket by helping you land a job.
It's called the Work Opportunity Tax Credit, and it encourages businesses to hire folks like veterans and ex-felons.
MAN: The credit can save a business money by reducing the cost of paying your wages by 25% or 40%.
If you clue them in to the credit, it might just give them that extra little nudge they need to hire you.
As usual, you can get more information about the Work Opportunity Tax Credit from the IRS website.
WOMAN: Okay, now let's talk about what you need to do to get right with your taxes when you get a job or start your own business.
When someone hires you as an employee, they should give you a W-4 to fill out.
It tells the employer how much tax to withhold from your paycheck.
The W-4 includes a worksheet that will help you figure out how much to have withheld.
You can also go to the IRS website and use their handy withholding calculator.
If your employer withholds too much, it'll give you a smaller regular paycheck and a big tax refund.
If your employer withholds too little, you might have to pay taxes when you file your return instead of getting a refund.
MAN: It's your choice, but you might want to lean toward withholding more rather than less so you won't have to pay taxes when you file your return and don't risk penalties for paying too little up front.
The money withheld goes toward paying federal and state income taxes and Social Security and Medicare taxes.
In January, your employer will send you and the government a W-2 that shows how much tax they withheld from your paychecks during the previous year.
You'll use the information on the W-2 to help you fill out your federal tax return.
WOMAN: If they don't have you fill out a W-4 when you're hired, that probably means they're treating you as a contractor instead of an employee, and they won't withhold anything from your paycheck.
Basically, this means you're self-employed and are responsible for paying all of your own taxes -- federal, state, Social Security, and Medicare.
You'll be expected to make quarterly estimated tax payments to the IRS every three months.
The next January, the business you do work for will send you and the IRS a 1099 that shows all the money they've paid you during the previous year.
You'll use that information to help you fill out your tax return.
If you're being treated as a contractor but think you're really an employee, you can file a form that's called an SS-8 to ask the IRS for help in figuring out how you should be treated for federal tax purposes.
You can find out more information about this process on the IRS website.
MAN: Some of you may decide to open your own business, and, like a contractor, you'll be responsible for paying your own taxes.
Taxes for businesses can be complex, so it might be a good idea to hire an accountant to help you deal with the bookkeeping.
The IRS has lots of resources to help business owners understand their tax obligations, such as publication 1066C, the Virtual Small Business Tax Workshop, and publication 583, Starting a Business and Keeping Records.
You can find these publications on the IRS website.
WOMAN: Let's talk for a minute about tax-avoidance schemes.
You may have heard of these schemes from friends or seen them on the Internet.
They make claims like, "You'll never pay taxes again," or "Share children's Social Security numbers to get a bigger refund."
Sound too good to be true?
You're right, they are, and they're against the law.
Participating in illegal tax-avoidance schemes can result in imprisonment, fines, and repayment of taxes owed, plus penalties and interest.
MAN: The IRS is constantly on the lookout for illegal schemes and is usually already ahead of the game.
Just go to the IRS website and type "tax scams" into the search engine to see what I mean.
If someone promises you a big refund without knowing your tax situation, they're trying to take advantage of you.
Remember, you are personally responsible for the information on your tax return, even if someone else filled it out for you.
Never sign a return unless you're sure the information on it is honest and correct.
WOMAN: Some of you may already owe back taxes.
Some of you may have not filed a federal tax return in years because your last refund was taken to pay student loans or child support.
Now is the time to get right with your taxes.
MAN: It may not be easy, but if you don't start dealing with it now, it'll only get worse.
It's always best to stand and face these kinds of things, because they won't just go away on their own.
WOMAN: The first step toward getting right with your taxes is to simply talk with the folks at the IRS.
You can call their toll-free number at 1-800-829-1040 or visit the nearest IRS office.
Office locations are listed on the IRS website.
Be sure to have your Social Security number handy and, if possible, the last tax return you filed.
MAN: Once you start talking with the IRS, you'll be able to find out exactly what your options are.
If you can't pay your taxes in full, you might be able to set up a payment plan tailored to your specific situation.
Some people are able to set up an offer-in-compromise that actually settles your tax debt for less than the full amount owed.
WOMAN: Another option is to visit a low-income tax clinic.
These clinics are run by nonprofit organizations and are specifically designed to help low-income folks deal with their tax problems.
In some cases, you can seek help from the Taxpayer Advocate Service, but only if you've tried to resolve your tax issues through normal channels first.
You can get more information about low-income tax clinics and the Taxpayer Advocate Service on the IRS website.
MAN: No one likes to pay taxes, but it's the price we all pay to live in this great nation.
WOMAN: It's an obligation, but it also has its benefits, like refunds, tax credits, showing your earnings for Social Security, and proof of income.
And you're not in it alone.
You can always get help when you need it.
MAN: Remember, the best place to get information on filing your federal tax return is the IRS website.
If you just can't get to a computer, call 1-800-829-1040 to get the information you need.
WOMAN: We all have to play our part and pay our fair share.
It's just the way the world works.
It's not always easy...
but I guarantee it's worth the effort to get right with your taxes.