Enter your filing status, income, deductions and credits and we will estimate your total taxes. Based on your projected tax withholding for the year, we can also estimate your tax refund or amount you may owe the IRS. Please note this calculator is for the 2020 tax year which is due in May 2021. We offer calculators for the 2015, 2016, 2017, 2018, 2019, 2021, 2022, & 2023 tax years. Please use our current 1040 calculator to see what you will owe next April.
COVID-19 & the American Rescue Plan Act of 2021
Important: Due to the coronavirus crisis and changes in the US federal tax code from the recently passed American Rescue Plan Act of 2021 the tax filing date for individuals to pay their 2020 income taxes was moved by the IRS from April 15, 2021 to May 17,2021. Two big changes in 2020 were self employed people were able to claim unemployment benefits AND the new ARP Act allows some Americans with a modified adjusted gross income (AGI) under $150,000 to deduct up to $10,200 in unemployment benefits from their taxes. The deadline move was only for federal income taxes and those who have estimated quarterly tax payments to make for 2021 are still required to make those by April 15, 2021.
Almost all businesses and workers in the U.S. must pay federal income taxes to the Internal Revenue Service (IRS). To prove that an individual has paid their fair share, they are required to file an annual tax return. This includes how much income you’ve earned in the year, how much tax you’re supposed to pay based on your income, and how much you actually paid.
If you overpaid, like most taxpayers do, you’ll receive a tax refund. On the other hand, if you underpaid, you must cover the lacking amount. Generally, tax filing is usually done between January until April 15 every year. The time period when you can send your tax return is called the tax season.
Uncertain? Have Questions?
This site offers free calculators and guides, though the tax code is large and complex. If you have specific questions be sure to read the associated IRS documentation and seek advice from your financial advisor or accountant.
Filing this year is especially difficult for ordinary taxpayers as some changes enacted this year retroactively reduce taxes on some unemployment payments from last year.
Due to economic disruptions caused by the COVID-19 crisis, individual tax filing dates have been changed. For 2021, individual tax filing started in February 12, 2021. Instead of the usual April 15 deadline, tax filing was automatically extended until May 17, 2021.
Of course, filing taxes are easier said than done. When you take your tax forms and sit down to look them over, you’re bound to become perplexed. The average person has to wonder who came up with this maze of information. It’s all so confusing and time consuming. Actually paying the taxes is just part of what’s frustrating. After all, there’s more than one reason why so many people dislike doing their taxes.
In this article, we’ll demystify a particular tax form that most taxpayers come across, which is the 1040 form. This is the document most taxpayers use when they are filing their personal or family tax return. It takes you through calculating how much you earned and helps you make income adjustments.
We’ll discuss the following aspects as they relate to taxes and the 1040 form:
Your filing status is used to determined your tax requirements. It’s an important factor in calculating your taxable income. An individual’s filing status is based on their marital status and family situation. There are five types of filing status: single, married filing jointly, married filing separately, head of the household, and a qualified widow(er) with a dependent child or children. If more than one filing status applies to you, the IRS tax filing interview will select the result with the lowest tax amount.
Tax brackets indicate your required tax rate based on your income level. Tax rates are determined according to a progressive tax system, in which the rate increases as an individual’s income grows. Thus, those with higher incomes fall into brackets with higher tax rates, whereas low income earners are categorized into brackets with lower tax rates.
The following table details 2020 filing status and tax rates:
| Tax Rate | Married Filing Jointly or Qualified Widow(er) | Single | Head of Household | Married Filing Separately |
|---|---|---|---|---|
| 10% | $0 – $19,750 | $0 – $9,875 | $0 – $14,100 | $0 – $9,875 |
| 12% | $19,750 – $80,250 | $9,875 – $40,125 | $14,100 – $53,700 | $9,875 – $40,125 |
| 22% | $80,250 – $171,050 | $40,125 – $85,525 | $53,700 – $85,500 | $40,125 – $85,525 |
| 24% | $171,050 – $326,600 | $85,525 – $163,300 | $85,500 – $163,300 | $85,525 – $163,300 |
| 32% | $326,600 – $414,700 | $163,300 – $207,350 | $163,300 – $207,350 | $163,300 – $207,350 |
| 35% | $414,700 – $622,050 | $207,350 – $518,400 | $207,350 – $518,400 | $207,350 – $311,025 |
| 37% | Over $622,050 | Over $518,400 | Over $518,400 | Over $311,025 |
The above rates are separate from Federal Insurance Contributions Act (FICA) taxes which fund Social Security and Medicare. Employees and employers typically pay half of the 12.4% Social Security and 1.45% Medicare benefit each, for a total of 15.3%.
Self-employed individuals pay self-employment taxes. This means they pay both halves of the tax.
For 2020, the FICA limit is on the first $137,700 of income. According to a tax plan President Joe Biden released before the election, they would enact policies that will increase taxes on individuals with income above $400,000. This means raising payroll taxes on every dollar of income over $400,000. This change has not yet been enacted and some tax scholars believe it is unlikely to be enacted.
In August 28, 2020, the IRS issued Notice 2020-65 which allowed employers to suspect withholding and paying Social Security payroll taxes. This goes for salaried employees earning under $104,000 per year through the remainder of 2020. As originally proposed, these are not forgiven payments. Rather, these are deferred payments which need to be paid in half by the end of 2021, and in full by the end of 2022.
Gains on asset sales which are held for at least a year are taxed at lower rates than ordinary income.
| Tax Rate | Married Filing Jointly or Qualified Widow(er) | Single | Head of Household | Married Filing Separately |
|---|---|---|---|---|
| 0% | $0 – $80,000 | $0 – $40,000 | $0 – $53,600 | $0 – $40,000 |
| 15% | $80,000 – $496,600 | $40,000 – $441,450 | $53,600 – $469,050 | $40,000 – $248,300 |
| 20% | Over $496,600 | Over $441,450 | Over $469,050 | Over $248,300 |
You earn capital gains when you sell a capital asset for more than what you paid for. Types of capital assets include real estate, stocks, and bonds. Taxes you pay on capital gains depend on how long you hold on to the asset before selling it. Long-term capital gains are obtained from assets that are held for a year or more. These are taxed at graduated thresholds set at 0%, 15%, and 20%. Most taxpayers who declare long-term capitals gains are usually at the 15% threshold or below.
A new year is around and you’re finally ready to sit down and do your taxes. If it’s late January to early February, you might have received a W-2 form in the mail from your employer. The W-2 form lists all the wages you earned and taxes taken out of those wages throughout the year. Make sure to hold on to this form. You’ll need this document in order to file your taxes moving forward.
The W-2 form has all the information you need to plug in when you file your 1040 or 1040EZ with the government. It is all neatly printed out in organized boxes so that you can follow instructions on the other forms as you fill it out. Remember, it is up to you as a taxpayer to file your taxes on time. This applies even if you are not expecting to receive a refund.
Besides the W-2 form, here are other tax forms you might need based on your source of income and interest payments you need to deduct.
Apart from tax forms, you need to gather other financial information to complete your tax return:
When you pay taxes, you do not pay taxes on your entire earnings. The government lets individual taxpayers deduct a certain amount on their income. Likewise, deductible income is exempted from any taxes. The main deduction you make is called the standard deduction. Each taxpayer is qualified to make a standard deduction which depends on your filing status. Note that standard deductions are adjusted annually to stay abreast with inflation.
The following table lists the 2020 Federal income tax standard deductions. Itemizing deductions generally only make sense if your total deductions exceed these thresholds.
| Filing Status | Standard Deduction |
|---|---|
| Single | $12,400 |
| Married Filing Jointly | $24,800 |
| Married Filing Separately | $12,400 |
| Head of Household | $18,650 |
| Qualified Widow(er) | $24,800 |
For tax filers who are married, there’s an added $1,300 deduction if you are blind or over the age of 65. In addition, both married couples can claim these deductions if they are both blind or over the age of 65.
Tax deductions are a beautiful thing. You can deduct money from the amount you owe (or the amount you should have paid) by claiming certain recognized deductions from your bill. It is not something that is kept a secret even. In fact, the IRS itself features some of the deductions that you can take right on its own website.
There are some deductions which are more common than others. The truth is that the tax code is written in such a way that some deductions just apply to more individuals. Some that you should be on the lookout for are the following:
If any of these situations apply, it is easy to take some deductions from the taxes that you have to pay. In this respect, you want to make sure you are gaining the maximum amount of value that you can out of these cuts to your tax bill.
You can itemize your deductions if you have spent over the standard deduction amount for the year. But generally, only around 10% of American taxpayers can provide itemized deductions. The following list details expenses that can be included under itemized deductions:
The Difference Between Tax Deduction vs. Tax Credit
A tax deduction reduces your taxable income, which essentially impacts the tax rate used to compute the taxes you owe. Getting a tax deduction might result in a larger refund because your tax rate is reduced. On the other hand, a tax credit lowers how much you owe in taxes. This is also done by giving taxpayers a refund.
The Tax Cuts and Jobs Act of 2017 signed by former President Donald Trump changed the overall tax bracket rate while increasing the standard deduction. Reforms to itemized deductions simplified individual tax requirements for millions of households. Instead of itemizing various deductions, which increases compliance costs, many individual taxpayers benefited from taking the newly expanded standard deduction. But note that after December 31, 2025, if Congress allows it, most changes to the individual tax code will revert to pre-TCJA standards.
In addition, the 2017 TCJA imposed 3 major changes which have a significant impact on homeowners:
1
Mortgage Interest Deductibility Limit: In the past, homeowners could deduct interest paid on up to $1,000,000 of mortgage debt, specifically for those who are married and filing jointly. After the TCJA, the new limit was lowered to $750,000, though homeowners who are refinancing an existing mortgage may still qualify for the old limit. For single taxpayers and those who are married and filing individually, the cap is now $375,000, which was $750,000 in pre-TCJA years.
2
Home Equity Interest Deductibility: In the past, second mortgage interest was deductible. Interest paid on HELOCs and home equity loans are no longer deductible unless it is obtained to build or substantially improve the homeowner’s dwelling.
3
SALT Limit: High-income filers who own homes in expensive coastal areas will find their state and local tax deductions have been limited significantly, to a cap of $10,000 per year.
As mentioned above, in 2017 President Trump pushed through tax cuts which had a significant impact on taxpayers. While taxes were reduced, Federal spending never was, so the national debt kept growing. Then by 2020, the COVID-19 crisis blew up the global economy and gave the United States wartime level deficits and national debts as lockdowns destroyed employment prospects and kicked in social safety net spending programs.
The World Economic Forum published a book titled COVID-19: The Great Reset.
Politicians at the highest levels rarely keep their campaign promises. Moreover, enacting many changes can require bipartisan buy in from both houses of the Congress. During his campaign for the 2020 presidential election, President Biden promised to lift the top individual rate from 37% to 39.6%, while increasing the corporate tax rate from 21% to 28%. In addition to lifting the top marginal personal tax rate, President Biden plans to impose the 12.4% Social Security payroll tax on any income above $400,000 per year.
“The dividing line is no accident: It was intentionally set to far exceed any definition of the middle class. And it spares much of the coastal professional class that is an important part of the Democratic coalition.”
In a March 24, 2020, Washington Post reported that President Biden’s tax plans would reverse part of President Trump’s steep corporate tax cut in 2017. President Biden’s tax plan includes higher levies on investment income and a higher top marginal tax rate. These tax increases are among the most controversial factors in the administration, which has caused friction with many business groups. That, as well as the administration’s $1.9 trillion stimulus plan, which was financed by adding to federal debt.
Comparing the 1040 Form with the 1040EZ
How nice would it be if the “EZ” in 1040EZ stood for “easy?” Unfortunately, that is not what those letters stand for. Rather, they exist only to refer to the part of the tax code that particular form is relevant to. Therefore, everyone should take some time to learn the difference between a regular 1040 form and a 1040EZ form.
The 1040EZ form is meant as a shortcut form for most individual taxpayers. If your particular tax situation is not overly complicated, then this is the form you should probably use. The 1040EZ tax form is designed for taxpayers with basic tax situations, providing a fast and convenient way to file income taxes.
The 1040 form is a little more complicated. While it’s designed for individual taxpayers, it entails a little more work. It’s also relevant to more complicated tax situations. Everyone has a unique tax situation, so there is no shame in filing out a more complicated form. If you’ve reviewed your taxes and recognize they are a little complex, then it’s right to use a 1040 form.
There are a variety of reasons why people might file for extension on their taxes. You might do so because you’re going to be out of the country when taxes are due. You may have a complicated business partnership, and you’re partner probably fell sick just before tax season. In some cases, you might be serving in the military and won’t be back from a combat zone for a while. If you cannot pay your taxes when they are due, you can request the IRS for an extension at a later date.
It is up to the discretion of the IRS if they grant extensions on tax payments. However, the IRS usually will agree to the extension, as long as the taxpayer has a good reason to ask for one. In this respect, those who feel they need a little more time should file the extension using form 4868. It is certainly a much better option than not filing the taxes or not paying at all.
As previously mentioned, the tax season for individual taxpayers has been extended from April 15 to May 17, 2021. This change came after many tax professionals and law makers appealed to the IRS for more time in filing their 2020 tax return due to interruptions caused by the COVID-19 crisis.
Individual taxpayers can postpone federal income tax payments until May 17 without interest and penalties, regardless of the amount they owe. The extension also applies to individuals who pay self-employment tax. If you still need more time to file taxes, you can use form 4868 to file an extension until October 15, 2021.
However, note that federal income tax payments will still be due on May 17. Be sure to pay your taxes by the due date to avoid penalties and interest.
The filing extension also does not include estimated tax payments. Estimated tax is a quarterly payment of taxes due based on the taxpayer’s earned income for the period. Those who are required to pay taxes quarterly are usually business owners and independent contractors. These are people who do not have taxes automatically withheld from their earnings. Note that these payments are also still due on April 15.
For US Corporate Income Tax Returns (form 1120) and US Income Tax Returns for Estates and Trusts (form 1041), the original deadline is still April 15, 2021.
Earlier in 2021, the IRS announced relief for citizens who were affected by the February winter storms. This included the states of Texas, Oklahoma, and Louisiana. Affected citizens in these states are given until June 15, 2021 to file tax returns and pay taxes. The general extension date of May 17 does not affect the tax filing extension for the mentioned states.
The 2020 tax filing extension provides people with extra time to contribute to their individual retirement account (IRA). This decreases their adjusted gross income (AGI), which allows them to potentially receive more favorable tax benefits. Taxpayers are considered to make an IRA contribution on the last day of the 2020 tax year, as long as their IRA contribution is made no later than April 15, 2021.
If you’re expecting a refund, it’s best to file as soon as possible. There is a real delay in tax refund payouts. The IRS had a delayed release of the 2020 1040 form. They are also prioritizing rebates, along with a reduced staff, which all contribute to slower refund processing. So if you need the money, file as soon as you can.
Millions of workers filed for unemployment benefits in March 2020 in the wake of the COVID-19 crisis. As their ‘benefit year’ comes to an end, they expect to receive a lower amount per week, or may no longer be qualified to obtain more aid.
But In March 11, 2021, President Joe Biden signed the American Rescue Plan Act. This bill comes with a $1.9 trillion economic stimulus package which aims to speed up economic recovery caused by the COVID-19 crisis. In short, it provides a tax break on unemployment benefits people received last year.
The tax break allows individuals to exclude up to $10,200 in aid from federal tax. Note that it only applies to federal income taxes, and some states may elect not to offer the tax break. The IRS announced that individuals who got unemployment benefits in 2020 and already filed their taxes do not need to file an amended return. They also issued a statement in March 12, 2021 for workers who have not yet filed their taxes.
Individual taxpayers should receive a 1099-G form which reports their total unemployment compensation from the previous year. For married couples, each one can exclude up to $10,200 of their benefits. This reduces their joint taxable income by a maximum of $20,400. For any amount beyond $10,200, the money received by each individual is taxable.
However, not everyone is eligible for the tax break. Only individuals who earned less than $150,000 in 2020 are qualified to make the claim, regardless of filing status. The $150,000 income limit refers to the taxpayer’s modified adjusted gross income (MAGI). MAGI is a measure used by the government to assess eligibility for certain tax breaks.
For example, a married couple earned an estimated $145,000 in combined income last year. If each of them received $6,000 in unemployment benefits, their total income would amount to $157,000. Unfortunately, this disqualifies them from the tax break. Be sure to check your calculations to verify if you are eligible for this benefit.
The IRS provides instructions on MAGI calculation and how to claim unemployment tax break. You may visit their guide here: New Exclusion of up to $10,200 of Unemployment Compensation.
Catching Up on Back Taxes
Unpaid taxes are a very serious issue. If you failed to file your taxes properly and pay the right amount, expect the IRS to know. They will come after you for unpaid taxes—with additional fines, fees, and interest. Don’t be shocked to receive mail stating the amount they claim you owe versus the amount you actually paid.
In extreme cases, the IRS had people living overseas such as John McAfee jailed awaiting extradition.
If the IRS claims you underpaid your taxes, you can challenge their claims. There are courts that allow you to question the taxes they say you owe. That being said, if you think the IRS is in fact correct in their estimations, you should certainly prioritize making the payment.
Unpaid taxes from previous years may include penalties. This can accrue daily compound interest until the matter is settled.
A lot of people who receive an IRS bill for unpaid taxes cannot afford to pay in full. These people usually face financial hardships, and would have paid it if they had enough money. With this situation in mind, the IRS allows taxpayers to make a partial payment or a payment plan. Individual taxpayers can use form 9465 to take care of a partial payment setup they made with the IRS. Make sure to diligently make your payments as agreed to remain on the good side of the IRS.
If doing taxes is a drag, getting a tax refund is a good thing. To obtain your tax refund, it all starts with going back to your employer. It’s likely you filled out a tax filing paperwork when you were first hired. You might not remember doing so, but it will have a major impact if you receive a refund and how much. You should talk to your employer about how your tax filing status is currently set up.
Most employees put either zero dependents or one dependent when they file their tax status. Between the two, the difference in how much taxes are taken out is pretty big. Any person is allowed to claim one dependent. They can get even more dependent on their filing of they are married or have children.
The more dependents a person has, the less will be taken out their paychecks for taxes on a weekly basis. On the other hand, if they claim fewer dependents, more taxes will be taken from their salary. But even with overpayments, the money comes back to the taxpayer as a refund. It all depends on whether you would like to receive that money on your weekly paycheck, or if you’re okay receiving it as a lump sum refund during tax season. Some people prefer to receive it as a large amount so they can save, use the money to pay off debts, or fund vacations.
How Long Does It Take to Get a Tax Refund?
A refund is issued within six to eight weeks of filing an accurate and complete paper tax return. If you file your income tax return electronically, you should receive your refund in less than three weeks. It can even be faster if you opt for a direct deposit. This is counted from the date the IRS receives your tax return.
Tax preparation is a booming industry. As you’ve observed, tax forms put out by the government are complicated. It is often easier for some people to get assistance from a tax professional who can help file their taxes more efficiently. If you don’t want to go to a professional to do it, you can at least use tax preparation software that helps cut down on some of the workload.
Tax professionals are available at outlets such as H&R Block, Jackson Hewitt, Liberty Tax, and many others. Some of those places are open all year long to help serve you with your tax questions, even when it's not tax season. You can call or schedule an appointment with them online whenever it is best for you.
Popular Tax Software Programs
Some popular tax software products are TurboTax, TaxAct, and H&R Block At Home. These are all great software programs that can walk you through the process to ensure your taxes are paid. Using these products will still require some of your time and attention, since you need to fill in all the necessary tax information into the computer program.
That being said, it is still a lot quicker than filing taxes traditionally with pencil and paper. Software programs prepare and electronically file tax returns from any computer or mobile device with internet access. The old method would still require you to mail your tax return, which adds more time to the process.
It is our sole duty as citizens to pay federal income taxes each year. To ensure we pay a fair share, the IRS requires us to file an annual tax return. This details how much income we’ve earned in a year, how much tax we’re supposed to pay, along with how much we actually paid.
When you fill out tax paperwork with your employer, it determines your tax filing status. You also have the option to include a dependent, especially if you have a child. You can either be single, married filing separately, married filing jointly, the head of a household, or a qualified widow(er). Your tax filing status, along with your assigned tax rate, will determine the amount of tax you need to pay.
Individual taxpayers are all allowed by the government to make certain deductions on their income. The primary deduction you make is called the standard deduction. This amount is based on your tax filing status, which is adjusted annually to account for inflation. Itemized deductions make the most sense if your total deduction surpasses the standard deduction amount. That said, it’s important to maximize the deductions you need to make the most out of your tax refund.
A tax deduction essentially lowers your taxable income. A lower income means you can receive a lower tax rate on your tax filing period. As a result, this increases your tax refund, which you can save or use for more important expenses. Taxes are normally filed every year on the 15th of April. In certain cases, you may have valid reasons for not submitting on time. When this happens, you can ask the IRS for an extension to file your taxes.
Remember, always seek professional tax advice if there is something that you do not understand. The tax code is very difficult to comprehend at times, and asking for help is crucial. Doing research and getting assistance is a much better option than guessing or doing nothing at all to get your taxes in order.
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