Frequently Asked Questions (FAQ)
Individual and Business Tax Deadlines
Q: When are individual tax returns due each year?
A: Individual tax returns are typically due on April 15, with an extended due date of October 15 if an extension is filed.
Q: When are Corporate Tax returns due each year?
A: Corporate tax returns are usually due in mid-March, with an extended due date in mid-September if an extension is filed.
Q: When are Extensions required to be filed each year?
A: Extensions should be filed on or before the original due date of the tax return. Extensions provide additional time to file but not to pay taxes owed. Timely payment is still required to avoid penalties and interest.
Mileage and Deductions
Q: I am a business owner, am I required to track mileage regardless of whether I take the actual or mileage method?
Q: What is the business mileage rate for business vehicle use each year?
A: The standard mileage rate for business vehicle use may change annually. To determine the current rate, consult the IRS guidelines.
Q: Can I claim a home office deduction?
A: You may qualify for a home office deduction if you use a portion of your home regularly and exclusively for business purposes. It's important to meet specific IRS criteria for eligibility.
Q: What is an accountable plan for employee reimbursements?
A: An accountable plan is a set of IRS rules that determine whether employer-provided advances and reimbursements to employees are taxable. When accountable plan criteria are met, these payments are not reported as wages on the employee's W-2. To be accountable, the plan must require employees to substantiate expenses, return excess advances, and make repayments if necessary.
Extensions and Penalties
Q: What happens if I miss the tax deadline or fail to file an extension?
A: If you miss the tax deadline and fail to file an extension, you may be subject to penalties and interest on any unpaid taxes. The failure-to-file penalty is generally more significant than the failure-to-pay penalty. It's crucial to file either your return or an extension request by the original due date to minimize potential penalties.
Q: What is the penalty for late payment of taxes?
A: The penalty for late payment of taxes is typically a percentage of the unpaid tax amount per month, with a maximum cap. The exact percentage and cap may vary, so consult the IRS guidelines for current rates.
Q: Are there any penalties for underreporting income?
A: Yes, if you underreport your income, you can be subject to accuracy-related penalties, which can be a percentage of the understated tax amount. In cases of fraud, the penalty can be more severe. Consult the IRS for specific penalty rates.
Individual Retirement Accounts (IRAs)
Q: What are the general rules for SEP IRAs?
A: SEP (Simplified Employee Pension) IRAs are retirement plans typically used by small business owners and self-employed individuals. Contributions are tax-deductible for the business, and the maximum contribution limit is based on a percentage of employee income, subject to annual changes.
Q: What are the general rules for SIMPLE IRAs?
A: SIMPLE (Savings Incentive Match Plan for Employees) IRAs are retirement plans for small businesses. Both employers and employees can contribute, with the maximum contribution limits changing annually. There are income limits for employees, which should be verified each year.
Q: What are the general rules for Traditional IRAs?
A: Traditional IRAs allow tax-deductible contributions, with earnings growing tax-deferred. The maximum annual contribution limit changes annually, and deductibility may be limited based on income and participation in employer-sponsored plans.
Q: What are the general rules for Roth IRAs?
A: Roth IRAs involve after-tax contributions, and qualified withdrawals are tax-free. The maximum annual contribution limit changes each year, and eligibility is subject to income limits that may vary annually.
Please note that specific figures and limits are subject to change annually, so it's important to consult the most current IRS guidelines for up-to-date information.