How Much Do I Owe The IRS?: Tips To Figure Out Your Federal Taxes
Everyone knows they must pay taxes, but few people know how much. In our new stay-at-home & gig economy, answering “How much do I owe the IRS?” has become even more complex. Even if you don't work in a “traditional” office setting, you will still probably owe taxes. Plus, now that alternative investments like crypto are becoming commonplace, there are even more ways you could rack up back taxes with the IRS.
How Much Do I Owe The IRS? — Essential Tips To Calculate Your Federal Taxes
While it's not easy to figure out how much you owe to the IRS, there are ways you could request this vital financial information. To save your mind some stress, we'd advise setting a few days aside where you could review all of this pertinent data. Also, please remember that a professional team like Travis Watkins Tax can help you sort out your personal or business tax situation.
Create An Account On The IRS's Website
There are a few ways you could reach out for tax info from the IRS, but the best way is to create an account on IRS.gov. At the end of 2016, the IRS went “hi-tech” and created a secure online portal where Americans can view and pay their taxes. Once you log into your account, you should gain access to your tax data, including payment paperwork from the past 24 months.
However, since this is the IRS, you can expect to supply a lot of data to create a secure account. Be sure you have all your relevant personal and financial info on hand to make this process smoother. In addition to your social security number, you'll need to supply your date of birth, a relevant financial account number, and your mailing address. You must also link this account with a telephone number and an email address.
In most cases, creating an account on IRS.gov should resolve most of your tax questions. Just keep in mind that payments take a few days to post on this site, and the data on IRS.gov only changes once daily. Also, your IRS portal isn't open 24/7. If you plan to use IRS.gov, you must log in between 6 AM - 9 PM EST on Mondays through Saturdays or 10 AM - 12 AM on Sundays.
If you're having issues with your IRS.gov account, you should check the IRS's official FAQ portal or reach out to an IRS representative. You can call the IRS at (877) 829-5500 or (800) 829-1040 to speak with an agent.
Consider Your Long Or Short-Term Capital Gains
While your income will play a central role in determining what you owe to the IRS, you must also factor in any trades you've made throughout the year. Whether you're investing in traditional assets like stocks or you're getting more involved in cryptocurrencies, the IRS can tax you any time you sell for a profit.
How long you hold an equity before selling will determine whether you have to pay short-term or long-term capital gains. In general, short-term capital gains are more expensive than long-term capital gains. In fact, if you make less than $40,000 per year and sell stocks you've been holding for the long-term (i.e., over a year), this is a non-taxable event. Short-term capital gains follow your income tax rate, while long-term capital gains could be either 0, 15, or 20 percent.
Please also remember that there are special tax rates if you've been participating in the crypto industry and Web3. For instance, if you've flipped NFTs or put your money into liquidity pools, you will have to pay taxes on these activities.
On the flipside, please remember that selling assets at a loss qualifies for “tax loss harvesting.” In other words, you could get deductions from the IRS when you report losses in the stock market. Please review your trading activity on your exchange so you can give the IRS your complete portfolio.
Check New Fintech Tax Accounting & Policies
As more people work freelance jobs, it's more challenging to get a clear read on yearly income. However, since most freelancers use fintech apps for payments, there are more ways employees can gather relevant info and present it to the IRS. Many new laws require freelancers and fintech platforms to make these transactions available to the federal government.
For instance, a new Venmo tax law requires PayPal and Venmo users to report transactions of over $600, and app users must file these payments in a Form 1099-K. The same is true for the new Cash App tax law. While there has yet to be a Zelle tax law, all fintech platforms will likely have to comply with these new standards.
Anyone involved in the freelance or gig economy should check the tax reporting rules related to their favorite fintech apps. It's also worth mentioning that alternative payments (including cryptocurrencies) are subject to taxation. Freelancers need to account for all their income to get an accurate picture of their tax bracket.
Alright, Now How Do I Pay The IRS What I Owe?
Once you've figured out how much you owe the IRS, the next question becomes how to settle this payment. In the simplest scenario, you could post a payment on your IRS.gov website, but filing taxes is rarely that simple. If you have multiple investments and work in a non-traditional office setting, you'll probably need the assistance of seasoned tax attorneys.
At Travis Watkins Tax, our team has years of experience helping people and businesses navigate all kinds of tax situations. Even if you think you know how much you owe the IRS, a professional tax attorney can help ensure you're not overpaying. Give Travis Watkins Tax a call at 866-817-0090 when figuring out how much you owe to the IRS.