Continuing our FAQ series, we wanted to review some common terms and procedures.
- How do you file for a tax extension?
- How do I know what tax bracket I am in?
- What is a tax credit?
How do you file for a tax extension?
To have a tax extension, you must file Form 4868. This form can be printed off the IRS website and mailed in, or E-filed electronically.
How do I know what tax bracket I am in?
There are seven federal tax brackets for the 2020 tax year, and the bracket that you are in depends on your taxable income and filing status. A chart of the income tax brackets can be found online, where you can use your filing status and taxable income to determine your tax bracket.
You can also follow this link to the IRS website for more information on tax inflation adjustments for the 2020 tax year.
What is a tax credit?
A tax credit is an amount of money that taxpayers can subtract directly from the amount of taxes owed to their government, reducing the actual amount of tax owed. They are generally designed to encourage certain types of behavior that are considered beneficial to the economy. A nonrefundable credit means you get a refund only up to the amount you owe. On the other hand, a refundable credit means you get a refund, even if it’s more than what you owe.
If you have any questions about the topics discussed in this article, or any tax law matter, please give us a call at Bononi & Company 724-972-4180.