T is for Taxes

1. True or False: Some parts of the world tax cow flatulence.

Nobody likes to pay taxes. Everybody hates tax collectors. In ancient Sumeria (as I noted in letter “C”), they had to press the taxes inside clay balls because they were “tampered” with, presumably by the tax collectors. Nowadays, the tax collectors–the IRS–has safeguards on top of security measures surrounding robust defenses against tampering. That’s a good thing for us. You might want to be more sympathetic towards the IRS. They’re safeguarding our money.

It’s True, cows are taxed extra in EU countries like Denmark and Ireland because their “expulsion” of methane gases are a significant contributor (some 18%) of greenhouses gases. Strange tax practices in history are a fascinating topic I covered before, in Tax the Peasants with this One Weird Trick!

Today, I’ll share a few fun facts about taxes in my annual post reminding you that the Volunteer Income Tax Assistance program might be able to do your taxes for you, for free.

2020, a Tax Year Like No Other

What a long, strange trip it’s been, this past year, even for the IRS. The lockdowns in 2020 happened right as tax season was ramping up to its peak, causing the IRS to close down. The American Rescue Act was also passed after the 2020 season started, and changes were retroactively taken to benefit taxpayers, but some of those were enacted after people had already filed.

2. True or False: Everyone is required to file taxes.
3. True or False: Social Security is taxable.
4. True or False: Your stimulus payments are taxable, including the $1400.
5. True or False: There is a fourth stimulus payment coming.

As far as myths and facts are concerned, here’s the skinny:

  • 2. False. You are only required to file taxes if you have income over a certain limit, somewhere higher than $12,000. The IRS has a handy little guide you can take to determine whether you need to file here. As they point out, if you didn’t file in the past, you can file prior years now, to make sure you get the stimulus payment if you are eligible. See below for how you might be able to do that for free.
  • 3. Well… it’s complicated. Social Security is not taxable if your income is below $25,000. Above that, it becomes partially taxable. If the only income you have is Social Security, no tax. (If you answered, “it depends,” that’s correct.)
  • 4. False. Hooray. The stimulus payments aren’t taxable. If you wondered why you were asked how much you received, as part of this year’s return, it was to make sure you did receive what you were owed.
  • 5. False. Congress could, in theory, pass another stimulus but it’s not under discussion and pretty unlikely. The Infrastructure bill being debated would fund jobs for people to fix potholes and buildings, not give people cash payments. (This seems to be a big “fake news” item on social media somehow; several younger people have mentioned that they’ve “heard” about a 4th stimulus. Nope.)
Cartoon by King, at lowtax.net.

Where Did April 15 Come From?

Antagonism towards taxes is as American as apple pie. (Which you know was created by German immigrants, right?) The Boston Tea Party was a protest against taxes levied by England.

Income taxes in the U.S. were first levied in the Civil War, then discontinued. They were added in 1913, then ramped up significantly to pay for World War I. FDR dialed them back, then dialed them back up to pay for World War II… hmm there’s a theme here. Originally in 1913, Congress set the filing date as March 1st. That was shifted in 1918 to March 15th, and then in 1955, reset to April 15th, where it has stayed.

6. True or False: You must file your taxes by April 15.

False. You need to pay your taxes by April 15th, or the “filing deadline” (this year, May 17). You actually have up until October 15th to file–and only if you have a filing requirement.

If you had Unemployment in 2020–and many, many people did–$10,200 of your unemployment was categorized as tax-free as part of the American Rescue Act. If you had unemployment, but filed your taxes before the Act was passed, you don’t need to file an amended return. The IRS, beginning in late May, will reassess returns already filed and return over-payments to taxpayers .

There Is Such a Things as A Free Lunch–or Free Tax Assistance

The Volunteer Income Tax Assistance program is sponsored and coordinated by the IRS but enacted through local volunteer groups. The program was initiated in 1969 by the IRS, and the first volunteer location was at California State University, Northridge in 1971.

In its fifty-year history, the VITA program has saved taxpayers billions both in helping claim refunds that would have been missed and saving people from paying tax services. Tax services are great! Let them do the tricky ones. A study of VITA in 2015 showed that 3.7 million returns were filed with a 94% accuracy rate.

VITA has income limits, but they vary by state and location. AARP also handles taxes through its own program, which may allow higher incomes. Some require you to be over 50, but others do not. It pays to call around to check the income limits of local sites because they can even differ.

I work with VITA in two northern California sites. In the site with 25 volunteers, we will file ~500 returns this year, helping our clients receive a half million dollars in refunds. We accomplished this in a virtual environment, handling intake in-person with a lot of masks, hand sanitizer, and patience. Many of our preparers are bi-lingual, but with all sort of languages–Chinese, Spanish, Hindu, German, Arabic, and Japanese. Intake days often sound like the United Nations. (Which is awesome!)

If you still haven’t done your taxes for 2020, you can find out if there is a VITA site still open near you. You can also check out getyourrefund.org. This is an online option, created by web developers here in northern California but managed nationally. You upload your documents into a secure encrypted site, a certified preparer handles them, sends them for your electronic signature, and files your returns.

7. True or False: If you didn’t file taxes for prior years, it’s too late to file them for free.

7. False. The Getyourrefund option is even good or prior years. They can help you file returns from 2017 through 2019 and are still open for 2020.

If you missed the boat in using a free service for this year, there’s always next year! You can look on Getyourrefund or the IRS website to find a VITA location near you.

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