With the deadline to file individual income taxes looming (it’s April 15, folks!), there can be lots of stress. Returns and refunds can be tricky to navigate, and it can be tough for those who need extra assistance to find proper resources.
Billy Penn is here to help, with some helpful resources to avoid tax penalties, file on time and receive help and guidance when necessary. If you haven’t filed yet, or haven’t figured out your plan to file, here is some guidance to get you started and completed with time to spare — unless your ritual is to file near midnight on Tuesday, April 15.
What is individual income tax, and how do I know what I will owe?
OK, let’s start with the basics. Individual income tax is the levy upon a person or household’s wages, salaries, investments and income. It’s collected by the Internal Revenue Service (IRS). There is a progressive federal tax rate on income – meaning the more a person makes, the higher the percent of income that will be due. Most states, including Pennsylvania, also assess a personal income tax.
Various deductions and tax credits, like the Earned Income Tax Credit or Child Tax Credit, means that most taxpayers do not pay federal income taxes on all income. Some state tax codes also offer credits and deductions.
Because of these deductions and varying types of income, everyone will be different in what they will owe or receive back from the government. Despite efforts to simplify the tax code, it remains complex.
The most important thing is to get started
Filing as soon as you can is important, says Will Gonzalez, the Executive Director of Ceiba, a nonprofit organization in Philadelphia promoting financial equality, inclusion and economic development for the Latino community. The organization also offers tax services.
Gonzalez said doing so is the easiest way to figure out whether or not you will owe money for taxes.
“In the most simple terms, you have until April 15 to file a return,” he said. “But obviously, if you’re getting a refund, you have a little bit more time.
“But if you owe money, and you don’t file your return by the 15th and pay [what’s owed] by the 15th, [then] you are subject to fines and penalties. And the way that interest is compounded by the IRS is not nice to go through.”
While you don’t have to claim a refund right away, the IRS says you should still “consider filing as soon as possible.” The deadline to claim a refund is generally within three years, according to IRS guidance.
The IRS also urges individuals to file income taxes “even if you don’t have to.” It offers three main guidelines for those considering if they’d need to file:
Generally, you need to file if:
- Your income is over the filing requirement, which generally starts at $14,600 for a single filer under 65 years of age
- You have over $400 in net earnings from self-employment (side jobs or other independent work)
- You had other situations that require you to file
Gonzalez urges those unsure of whether they will receive a refund or owe to file taxes ASAP – as this will give clarity and answers quickly.
What if I need help filing my taxes?
The city offers a variety of resources for those needing extra assistance – financially or due to accessibility issues – in filing taxes.
The IRS offers free tax filing help for qualifying taxpayers through its Volunteer Income Tax Assistance (VITA) programs. There are various sites and providers in the region, and individuals looking for providers nearby can search on this website.
While many free tax programs are income-based, there are also free tax-filing resources for people with disabilities or limited English proficiency. In Philadelphia, there are five suggested city-partnered, free tax-filing resources. The resources have different income requirements, filing date availability and services – but all can help with state and federal tax returns.
Gonzalez explains that Ceiba offers free filing services to limited English speakers and families making less than $59,000. He said two other free filing partners, HACE CDC and Congreso, offer similar free tax-filing resources for low-income families.
Campaign for Working Families is another resource that Philadelphians in low-income families can use to file for free. The Philadelphia Chinatown Development Corporation offers free filing assistance for those with a disability, in addition to helping those from low- to moderate-income families, as well as those with limited English proficiency.
Gonzalez said most filing programs that help those with a limited English proficiency provide information in both English and Spanish. He also shared a resource for those who are fluent in other languages.
“Just dial 311, speak the language you feel most comfortable with, and then somebody there will point you in the right direction to receive this service,” he said. Philadelphians can dial this number anytime between 8 a.m. to 8 p.m., Monday to Friday, to get connected with a representative. For those outside of Philadelphia, dial 215-686-8686.
Gonzalez says his organization also works with two other community partners to provide tax services. He urges those who meet these criteria and need help filing to use these services.
“Why pay for something that you can get for free?” he said. “All VITA tax sites go through a certification process and are monitored by and work closely with the IRS. And, many of us have years of experience. So, for example, we’ve been doing it for 20-plus years, and so has the Campaign for Working Families. And we have safeguards in place to ensure that the return is prepared accurately.”
He highlights that these certified preparation centers can also help file returns electronically, meaning that if individuals are expecting a refund, they can get it quickly and directly in their bank accounts.
What mistakes can I avoid in filing taxes?
If you don’t file or pay your taxes by the April 15 deadline, you may be subject to penalties, fees and high interest rates. While a tax extension can extend the amount of time until you are required to file your return, it’s important to know that the payment is still due by April 15. The IRS is adamant that “an extension to file is not an extension to pay.”
According to IRS guidance, taxpayers should file and pay as much as they can and as quickly as they can on their tax return to avoid penalties and interest. This will reduce interest or penalties on the outstanding amount, and can help avoid the late payment penalty.
The IRS also offers payment plans, delayed collection and penalty relief for qualifying taxpayers based on income, situations and other conditions.
Contacting the IRS or visiting various VITA sites in person can help individuals make a plan on how to deal with interest and penalties, noted Gonzalez.
“The IRS also has an office called the Taxpayer Advocate, so if you have some challenges in making your payments, you can make a payment plan with the IRS,” he said. “You can also address any issues that you may have had in the past — maybe there was some misunderstandings with the W2 or 1099, in the past, and you need some clarity. So we encourage you to reach out to the IRS or even come to a VITA site, and then we can help you connect with the IRS to address any of those problems.”
Gonzalez also emphasized the importance of an accurate tax return. This can affect things like eligibility for mortgages, car loans and other important life purchases.
“Those returns are going to be used when you apply for a mortgage, those tax returns, which are sworn statements, are going to be used when you apply for a small business loan, when you’re applying for a FAFSA [federal student loans] for your children,” he said. “And so it’s really important that they be accurate, that they reflect your true income. Sometimes people try to be too cute in a way and underreport their income, and then they apply for a mortgage, and then they don’t qualify for the mortgage because they didn’t accurately report their income.”
Underreporting income on a tax return could constitute lying on a sworn statement, he said, and can legally and financially complicate future opportunities for individuals.
Again, individual income tax returns are due either electronically by the end of day on Tuesday, April 15, or via mail at your local post office before it closes on that day.
