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FAQ

Do you have to pay tax for selling on eBay?
If you are a US taxpayer, and you sell items on eBay on a routine basis, you are required to report your revenue from the sale of such items as part of a business return (e.g. Schedule C or C-EZ of Form 1040, Form 1120, Form 1120-S, Form 1065, or other form as appropriate to your tax status). You may generally deduct your expenses in producing and shipping those items, any costs you incur in marketing them (including eBay listing fees), and any other expenses that can be reasonably attributed to the process of acquiring, producing, or selling those items.If you only occasionally sell items on eBay (that is, you are not in the business of selling things on eBay) and you are a US taxpayer filing a personal income tax return, you must report the entire amount of what you received for whatever you sold as “other income” on Line 21 of Form 1040. Note that you cannot file Form 1040-A or Form 1040-EZ if you have taxable “other income” that isn’t from unemployment compensation or Alaska permanent fund dividends; there is no equivalent of Line 21 on Form 1040-A or Form 1040-EZ. Effective with tax year 2021. these amounts are instead reported on Line 21 of Schedule 1 of Form 1040.eBay does not send Form 1099-MISC because eBay does not process payments itself other than to collect its listing fees. Thus, eBay will never send you a Form 1099-MISC or Form 1099-K. If you use a payment processor such as PayPal, and you process transactions through that processor totaling more than $25,000 from 200 or more payors, that processor will send you, and the IRS, Form 1099-K, indicating that you were the recipient of the specified amount of funds. If your return does not, somewhere, reflect the receipt of those funds, the IRS will “correct” your return by adding the amount you failed to report as income. This will generally increase your tax and reduce your refund or increase the amount you are required to pay, and could result in penalties for underpayment or underprepayment of tax. In addition, if you claim the Earned Income Tax Credit, Child Tax Credit, or American Opportunity Tax Credit, and fail to report any part of your taxable income, you may be subject to additional penalties, and may also be banned from claiming these credits in the future.If you indicated to the payment processor you use that you are not a US taxpayer (by providing them with form W-8BEN or W-8BEN-E, in lieu of form W-9, when they asked you for a SSN), they will not file Form 1099-K with regard to payments to you, and you do not have to file a US tax return. However, they may file Form 1042-S instead, and may instead withhold “exit taxes” from payments made to you in accordance with the rules pertaining to transfers of US-source income made to non-US taxpayers. Consult a tax accountant for additional information.(Updated April 2021 to correct errors and reflect changes in forms for tax year 2018.)
Are Bitcoin traders reporting their gains to tax authorities, and if not are they at risk of being charged for tax evasion in the future since the government rarely loses out on tax revenue?
Disclosure: this is informational only. For tax advice, please speak with a professional tax advisor.According to an April 2021 article in CoinDesk, CreditKarma reported that 0.04% of their users reported cryptocurrency taxes (out of an estimated 5% of Americans who own cryptocurrency). We don’t know how representative these samples are, but if we take them at face value, that means 0.8% or fewer than 1 out of every 100 cryptocurrency holders is reporting crypto tax. Of course, many of these bitcoin holders may have just bought and held, without triggering any taxable events. However, this still seems like there is considerable underreporting going on.To answer the second part of the question ‡ yes, this absolutely brings risks for those evading taxes. The IRS has already subpoenaed Coinbase, which lead them to issue 1099-K forms for many of their users (Gemini has followed suit as well). The IRS has also hired Chainanalysis to help identify those breaking the tax rules. Even if you aren’t convinced that the IRS or other government agency will catch you today, keep in mind that blockchain transactions are posted on an immutable public ledger. Forever. So if the government ever figures this out, they will get you retroactively, meaning you’ll have to pay back the taxes + penalties + interest. Once people realize this, they often figure it is not worth the risk of evading.For those looking for more information about bitcoin taxes, check out this crypto tax guide.
Are crowdfunding funds tax deductible?
In the UK it would depend on the type of crowdfunding transaction.A crowdfunding scheme launched by a charity for its charitable purposes where the funds were a donation would qualify as charitable donation and would therefore be tax deductible.Some crowdfunding equity transactions for business qualify as Enterprise Investment Schemes (30% tax relief on investments up to £1m) or Seed Enterprise investment Schemes (50% tax relief on investments up to £100,000). These investments qualify for generous tax relief in fact the tax relief might be at higher than your marginal rate.There are specific rules that must be met to be a qualifying scheme.
How can I get a copy of my wage and tax statements (Form W-2)?
By Federal Law, the previous year’s wages, eg 2021. must be supplied in full as a W-2 or a 1099-Misc, 1099-K, etc *BY* January 31st of the following year, so January 31st 2021. for all wages in 2018.IF your employer does not have a current address on file for you, that’s *YOUR* fault and not the employer. You would have to contact them, request a replacement W-2 and wait till it arrives.IF your employer is refusing to provide one, *FLAT OUT* you can contact the IRS to get a ‘transcript‡ of your earnings (reported) that year by your employer(s). Please do note that it *ONLY* covers Federal Taxes and Income records. Any state or local taxes will not be listed.
Do crypto exchanges like Coinbase and Gemini send customer tax information to the IRS?
Yes, they do.Especially they started to report more since January. Before it was without control and only big accounts and big investments were controlled. Right now they track everything.Don’t forget to pay taxes, Gabe! I will be filling my taxes today and will have a lot of questions to tax advisor.
What are the factors that account for tax evasion?
In the US, individuals report their taxable income with documents received by competent institutions such as employers, banks and brokerages, combined with the honor system of accounting for other income and expenses.The system relies on the honor of taxpayers and tax preparers for the accuracy of tax reporting. Not everyone is honorable.The policing agency, the IRS, is underfunded and overworked. It manages an ever changing and overcomplicated tax code.The result is the IRS estimates there is a $300-$400 billion tax gap between taxes that should be collected and taxes actually collected.Congress is responsible for both IRS funding and the convoluted tax code. I expect little change in the future.
Is it hypocritical to believe that people should keep the money they earn, yet tax the working class and give the fat cats tax breaks?
Is it hypocritical to believe that people should keep the money they earn, yet tax the working class and give the fat cats tax breaks?absolutely silly.the wealthy people pay far more in taxes than the rest of us. A tax break means they get to keep some of their money, and they’re paying at a much higher percentage. It’s hypocritical and low information to believe they should keep paying so much rather than condemn those who contribute NOTHING but need.If you want to get mad at a group, get mad a the welfare rats and parasites who sponge off of lower income, medium and upper income people and contribute nothing but debt and need.
What does it mean when you "do your taxes"?
“Doing your taxes” in the United States involves collecting the information on all the income you (and your spouse and dependents) have earned in the past year and supplying that information to the IRS (Internal Revenue Service) and other local tax authorities from the state or even city if required.Preparing your taxes will determine what you may owe in taxes, or what rebates you may be entitled to. There are individual (personal) tax returns as well as business tax returns. There are also some others such as estate returns.The money gathered by taxes is used by the government to pay for the services and programs sponsored by the government for it’s citizens.Nobody likes to pay taxes, but nobody likes cuts in services either. The congress votes on how to spend the money. They fight a lot. Sometimes if they can’t agree, the budgeted money starts to run out, and the government can begin to shut down. People don’t get paid who perform services for the government. Some are furloughed, and others who are considered essential, have to work with no pay.President Trump recently shut down the government for the longest time in history because he wanted money to build his wall. Congress refused. Finally the President accepted the budget that was proposed by congress, and government employees started to get paid again.Below is more info directly from the Official Guide to Government Information and Services | USAGov website.How to File Your Federal TaxesTaxes are due on April 15, 2021 (April 17 in Maine and Massachusetts). The new tax law has changed many forms, credits, and deductions. Check this page carefully before filing your federal income tax return.Infographic: Tax Reform - Big Changes to Credits and Deductions for 2018Learn the changes that affect you and your family under the tax reform law.View a larger version of the infographic.Show Description of InfographicFile a Federal Income Tax ReturnThe federal government uses taxes to pay its bills and provide public goods and services. The Internal Revenue Service (IRS) collects the taxes you owe through withholding from your paycheck, estimated tax payments, and when you file your taxes each year.Do I Need to File?You may not have to file a federal income tax return if your income is below a certain amount. However, you must file a tax return to claim a refundable tax credit or a refund on income tax withheld. Find out if you have to file a tax return.Follow These Steps to File a Tax ReturnNote: The new tax law has changed the forms, credits, and deductions you may have used in the past. Learn the basics of the tax law changes.Gather your paperwork, includingA W-2 form from each employerOther earning and interest statements (1099 and 1099-INT forms)Proof of health insurance coverageReceipts for charitable donations, medical, and business expensesChoose your filing status - Whether you’re married and the percentage you pay for household expenses determine your filing status.See if you qualify for free tax return preparation - The IRS offers free tax help to people with a low income, military service members and their families, people with disabilities, seniors, and taxpayers with limited English.Decide how you want to file your taxes - The IRS recommends using tax preparation software for easiest and most accurate returns. You can use free or paid programs to calculate and file your taxes online or get paper forms to mail to the IRS. You can also hire a tax preparer to do your taxes for you.Calculate your taxes, credits, and deductions - Tax law changes may impact your credits and deductions and the taxes you owe.Add up your sources of income, including salary, interest and investment earnings, and pension or retirement accounts.Check if you are eligible for education, family, and dependent credits for a qualifying child or relative.You may also qualify for deductions for things like mortgage interest or charitable donations. Credits and deductions can lower the amount of your taxable income. But keep in mind, while the IRS has increased the standard deduction for tax year 2021. it eliminated some other types of deductions.If you owe money, learn how to make a tax payment, including applying for a payment plan.File your taxes by April 15, 2021 (April 17 in Maine and Massachusetts).Find out how to check the status of your tax refund.Contacting the IRSFor the fastest information, the IRS recommends finding answers to your questions online. You can also call the IRS. This option works best for less complex questions. Keep in mind that wait times to speak with a representative may be long.Do I Need to Pay Quarterly Estimated Taxes?If you’re self-employed, not enough tax is taken out of your salary or pension, or you have other earnings such as alimony, interest, or dividends, you may need to pay quarterly estimated taxes. Learn how to calculate your estimated taxes, when they’re due, and the penalty for underpaying.IRS Mailing AddressesThe Internal Revenue Service (IRS) provides mailing addresses for tax returns, non-return forms, applications, and payments. The correct mailing address to use depends on the purpose of contact and the region of the country you are in:Paper Tax Returns (with or without a payment)Non-Return Forms (applications and payments)You can also check a form's corresponding instructions for a mailing address.Get Tax Forms and PublicationsFederal Tax FormsFederal tax forms have changed as a result of the new tax law. Get the new forms, instructions, and publications for free directly from the Internal Revenue Service (IRS).Download them from IRS.govOrder by phone at 1-800-TAX-FORM (1-800-829-3676)The IRS can provide many forms and publications in accessible formats, including Section 508 accessible PDFs and Braille or text. They also have forms for prior tax years.You can find the new tax forms in your community for free atPost officesLibrariesIRS Taxpayer Assistance CentersState Tax FormsDownload your state's tax forms and instructions for free.Tax Filing DeadlinesThe Internal Revenue Service (IRS) began accepting and processing federal tax returns for tax year 2021 on January 28, 2021. The deadline to file federal taxes for most taxpayers is April 15, 2021. unless you file for an extension. If you live in Maine or Massachusetts, you have until April 17, 2021. to complete your return.Federal and state taxes usually have the same filing deadlines. Find out the tax filing due dates in your state. If you do not file and pay your taxes on time, you will be charged interest and a late payment penalty. For taxpayers due a refund, there is no penalty for filing a late return.Tax Filing and Payment HelpLearn how to file a federal income tax return.File online or find the address for mailing your paper return. To find out how to mail your tax return, get tips and information from the U.S. Postal Service (USPS).Explore free online tools from the IRS and special programs for qualifying taxpayers.Learn about your payment options if you owe money. If the IRS owes you money, you can choose to receive your tax refund by direct deposit, U.S. Series I Savings Bonds, or paper check.Extension to File Your Tax ReturnIf you are unable to file your federal income tax return by the due date, you may be able to get an extension from the Internal Revenue Service (IRS). This does not grant you more time to pay your taxes.You may be able to get an automatic six-month extension to file your return. To do so, you must file IRS Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return (PDF, Download Form 1099 K Reader) by the due date for filing your calendar year return (usually April 15) or fiscal year return. For a Spanish version of this form, download IRS Form 4868sp (PDF, Download Form 1099 K Reader).Special rules may apply if you are:Living outside the United StatesOut of the country when your six-month extension expiresLiving in a combat zone or a qualified hazardous areaGet tax filing information, including guidelines on extensions of time to file.Get Your W-2 Before Tax TimeThe Wage and Tax Statement, known as a W-2 form, is an important document to have at tax time. This form shows the income you earned for the year and the taxes withheld from those earnings. If you have had several jobs over the year, you may have several W-2 forms to file your tax return. Employers must send you your W-2 by January 31 for the earnings from the previous calendar year of work.The Internal Revenue Service (IRS) offers advice on what to do if you were an employee and haven't received your W-2by January 31 or if the information is incorrect. Employers that have questions about filing W-2 forms for employees can check these resources on where, when, and how to file from the IRS.For more information, contact the IRS. Wait times to speak with a representative may be long.1099 Income StatementsBusinesses and government agencies use Form 1099 to report various types of income other than wages, salaries, and tips to the Internal Revenue Service (IRS).Common types of Form 1099 include1099-MISC for contracting and freelance work, gambling and prize winnings, and more1099-INT for bank account interest1099-DIV for investment distributions and dividends1099-R for retirement account distributions from 401(k) accounts, IRAs, Thrift Savings Plans, annuities, and pensions1099-S for real estate sales incomeEvery business or agency mustComplete a Form 1099 for each transactionRetain a copy for its recordsSend a copy to you and to the IRS. You should have received your copy by early February (or mid-February for Form 1099-B).You must include this income on your federal tax return.Incorrect or Missing Form 1099If you do not agree with the information contained in your Form 1099, contact the business or federal agency that issued it.If you did not receive your Form 1099, contact the business or federal agency that should have issued it.Contact the IRSIf you requested Form 1099 from a business or agency and did not receive it, contact the IRS. Wait times to speak with a representative may be long.Check Your Tax WithholdingWithholding is the amount of income tax your employer pays on your behalf from your paycheck. Keep in mind, the new tax law has changed tax rates, credits, and deductions, and could affect your withholding. If you don’t withhold enough tax, you could face a penalty.Use the IRS Withholding Calculator to estimate your 2021 income tax and compare it with your current withholding. You’ll need your most recent pay stubs and income tax return.The results from the calculator can help you figure out if you need to fill out a new Form W-4 (PDF, Download Form 1099 K Reader) for your employer or make an estimated tax payment to the IRS before the end of the year.Filing Tax Returns When Living AbroadWho FilesU.S. citizens or resident aliens (Green Card holders) living abroad must pay U.S. income tax on their worldwide income.The rules for filing tax returns, paying estimated taxes, or estate taxes are generally the same whether you are in the U.S. or abroad. Get information for taxpayers living abroad.How to FileAs a resident alien or U.S. citizen living abroad, you can use the same forms (1040, 1040A or 1040EZ) as people living in the U.S. to file your taxes.The amounts you report on your U.S. tax return must be in U.S. dollars. Learn more about filing requirements.When to FileAs a taxpayer living outside the U.S., you are allowed a two-month extension. Get more information about your filing date.Learn more about the rules for getting a two-month extension.Where to FileIf you’re living outside the U.S., you can mail your return or use e-file.Learn where to mail your return if you are expecting a refund or if you owe money to the IRS.Where to Get Tax Preparation Help While Living AbroadTaxpayer service is no longer available at foreign posts of duty. Instead, use the International Taxpayer Service Call Center.Find More Resources for Taxpayers Living AbroadUse the list of frequently asked questions (FAQs) about international individual tax matters or search by international tax topic.Find a list of tax FAQs especially for resident aliens.Use the international taxpayers interactive tools for general tax questions.If you owe money to the IRS but do not have a U.S. bank account to send a check, you may be able to use a debit or credit card.Nonresidents Filing Tax Returns in the U.S.Who FilesYou will need to file a U.S. tax return depending on your:Source of U.S. incomeTax filing statusReview this list of five situations to learn more about who must file.How to FileYou will need an individual taxpayer identification number (ITIN) or Social Security number (SSN). The IRS will issue an ITIN if a foreign national is not eligible for an SSN for tax reporting purposes. Learn more about getting an ITIN for federal tax reporting.You can use form 1040NR to file a tax return.Review the specific filing requirements if you are a foreign exchange student or visiting scholar.If you are on a J-1 visa working as an au pair, you may need to file estimated taxes using form 1040ES-NR.If you can’t file your return by the due date, use form 4868.Find More ResourcesReview the tax treaty information between the U.S. and your country. In some cases, your taxable amount may be lower.If you are a foreign student, use this reference guide to learn more about the special rules that apply to your U.S. income including your liability for Social Security and Medicare taxes.Learn more from the most recent version of the U.S. Tax Guide for Aliens.Do you need help?Ask us any question about the U.S. government for free. We'll get you the answer or tell you where to find it.Call USA.govChat with USA.govLast Updated: March 28, 2019
Does it make sense to make after-tax contributions to a 401(k)?
I do not generally believe in apologies or regrets in general. However, I deeply regret not taking maximum advantage of my wife’s after-tax contributions to her 401(k). The problem, was that I simply didn’t understand how to use the end game properly. Now, with 20/20 hindsight, I would have made the most of it. This is a problem with poorly run company 401(k) plans. Nobody can give you any useful information. The information that they DO give you, is often completely fictitious. Your mileage may vary.I have written extensively on IRAs and 401(k) plans on Quora. I suggest that you check on some of these other, very useful answers, but check all facts for yourself.Being older, my wife and I qualify for the catchup contributions for standard IRAs and 401(k) plans. I erroneously state that most people can put away $24,000 per year in most of my 401(k) answers. You younger folks can only put around $18,000 away annually. I am restraining myself from answering any more questions, until I make updates and fact checks to my literally hundreds of existing answers. Drat!I was just asked to amplify my answer above to reflect the better strategy on the aftertax contributions to a 401(k).Very well. The point of making aftertax contributions, is so that you can move it to a Roth IRA after you no longer work for that company. You then find a self-directed trustee, and transfer the Roth IRA to them. You then have a taxfree investing machine, funded with as much muscle power as you could afford.Ultimately, you want ALL of your investing assets located in a Roth IRA account, or the equivalent. Not paying taxes is great for your investment returns!So, once you max out your tax deductible contributions, (so that you make the most “profit” today, in the form of government bribes called tax rreductions, which you can then live on, every bit as well as a normal pay raise), you then head on to aftertax land, and make additional contributions, until you can’t put another dime into your investing accounts, either because you can’t live on a dime less income, (awww, c’mon, not even another DIME?? Sure you can!), or, you have reached the legal maximum for the year for ALL types of permitted accounts. This is difficult to do, because you could always start up a company, and then put away uowards of $54,000 per year into a SEP IRA, ON TOP of all of your other contributions!If you have leftover standard deductions lying on the table, now is your chance to rreduce your future tax bills permanently, as well as minimizing your required RMDs someday, by converting an amount equal to the remaining, unused, standard deduction via a Roth IRA conversion.This is a simple transfer from your taxable IRA to a Roth IRA. If you have both types of accounts open at the same trustee, it is as simple as a bank transfer, which is exactly all it ever is anyway. The IRS gets notified that you engaged in a taxable event, and you have another 1099 to file. However, the remaining standard deduction turns it into a tax exempt transaction, and you get a “free ride” to the extent that anybody ever gets a free ride from the government!What is another fund that you want to create, and fund with as much money as possible? A real estate purchasing fund, that started out as a fiscal emergency fund, and outgrew the 6 - 12 month take home paycheck balance needed for moderate fiscal security from the normal events that cause financial setbacks in a typical household!The two year capital gains exclusion on the sale of your primary residence could be turned into the equivalent of aa Roth IRA, without ANY of the burdensome rules of a retirement account! This legislation was almost changed in 2021. so take advantage of it before it goes away! Same for a Roth! Open at least one today, before congress comes to its senses!If you do it correctly, you spend your cash account on whatever POS property that you can afford with half of your available cash, and fix it up with the remaining half, to as good a condition as possible. The profits, (if any), if you live in the property for 2 out of the previous 5 years, are tax free for up to $250,000 for filing single, and up to $500,000 for married, filing jointly! Hey! Tax free money is tax free money, folks!The point of paying all cash, is to help ensure that you reduce expenses as much as possible, thus increasing your odds of even HAVING some profits when it comes time to sell.A quick pop quiz to see whether or not you can even TELL what a profit looks like! Don’t feel bad if you fail. Most people do, sigh!A couple buy a house for $125,000 all cash. They spend $5,000 on a new kitchen. The wife gets transferred to a new job, and they decide to sell sooner than anticipated. They flip it a year later for $140,000. While this was bit of a disappointment, they didn’t think that their alternatives were viable. How much of a profit did they make?“Creative” accounting makes it impossible to come up with an exact answer. Depending on various circumstances, you could legitimately claim various amounts and all of you would ALL be correct.However, you get an “F” on your pop quiz, if the NET LOSS that you calculated on the sale of this house is anything less than -$1,000! More likely, they lost over $5,000 that year! There is NO WAY that they made even a dime, so stop fussing over your “F” grade! It just shows that you either have insufficient experience at this game, or, you failed to add up ALL the costs of home ownership, and are convincing yourself that you are making money, when, in fact, you are losing money, after all expenses.If you assume that the couple took out a mortgage, (which MOST people do), the losses are doubled to tripled. Sorry, folks! That’s just how the cookie crumbles!As always, upvote and follow me, either if you are entertained by my answers, or, if you decide to rethink how much profit your uncle claims he made on the sale of his condo last year!Thanks for watching!