Contact Us
Get all your questions answered by scheduling an appointment to meet with one of our experts.
Email Us
info@ledgerwisetax.com
Call Us
(561) 246-3393
Visit Us
3141 S Military Trail #105
Lake Worth, FL 33463
F.A.Q.
Frequently Asked Questions
For my tax filing, what information will you need from me?
If you provide your tax advisor with a clear picture of your finances, they will be able to file your tax return accurately and identify ways to save you money as soon as possible.
Prepare to provide your tax advisor with the following information:
- Your identification information and that of your dependents. For anyone who will appear on your tax return, you’ll need their Social Security or Individual Taxpayer Identification Numbers (ITINs) with dates of birth. By doing this, your tax advisor can verify who you are, and the IRS won’t return your tax return due to numbers that don’t match.
- Tax returns from the most recent tax year. Your tax advisor can figure out what deductions and credits you qualify for based on your last year’s return, even though things can change from year to year.
- Tax forms and income statements. In order to file your taxes, your tax advisor will need copies of your W-2 from your employer or all those 1099 forms (if you’re a freelancer or independent contractor).
- An expense report. Rather than taking the standard deduction, itemizing your deductions will require you to have proof of your expenses. Hopefully, you saved your receipts!
Will My Side Hustle Affect My Taxes?
As a freelancer, independent contractor, or small-business owner, you probably deal with a different type of tax form than a typical employee. In addition, you may have to pay quarterly taxes and self-employment taxes on your side hustle income.
So you’re not blindsided when you file your taxes, your tax pro can sit down with you and guide you through what you can expect during tax season.
What deductions might I qualify for?
Most people qualify for the standard deduction or itemized deductions that reduce their taxable income. You can often deduct the most from these types of expenses.
Employers still have plenty of opportunities to save on their tax bills, but self-employed workers and business owners have more savings opportunities. When preparing your Form 1040, employees can deduct contributions to IRAs, HSAs, and FSAs.
For employees, contributions to 401(k)s and other employer-sponsored retirement plans are not deductible on your tax return. Your W-2 shows that these dollars have already been deducted from your wages.
Additionally, you can deduct student loan interest, home mortgage interest, state and local taxes, and more if you meet certain income criteria.
You can deduct a lot of the costs associated with running and maintaining your small business if you have a side hustle, work as an independent contractor, or own a small business. Deductions are available for home office expenses, self-employment taxes, supplies, equipment, depreciation, health and business insurance, and utilities.
Marginal versus effective tax rates: what's the difference?
The United States uses a progressive tax system, which means that as you earn more income, your marginal tax rate increases. Tax rates in 2022 range from 10% for taxable income above $1 to 37% for taxable income over $539,900 for single filers and $647,850 for married couples filing jointly. A marginal tax rate is the tax rate of the tax bracket where your last taxed dollar falls. As an example, if your taxable income in 2022 is $525,000, then your marginal tax rate would be 35%.
You can calculate your effective tax rate by dividing your taxable income by the total percentage of taxes you have to pay. You can calculate your effective tax rate by determining your taxable income and then calculating your total tax bill. The effective tax rate is calculated by dividing the total tax by your taxable income.
Tax credits or tax deductions: which is better?
In most cases, a tax credit is preferable to a tax deduction. Using tax credits reduces your tax liability dollar for dollar, while using tax deductions lowers your taxable income. When you prepare your taxes and have a total tax bill of $10,000, a $1,000 tax credit would reduce that bill by $1,000.
Your income tax liability wouldn’t decrease by $1,000 if you had a $1,000 tax deduction and earned $50,000 in taxable income. As a result, your taxable income would now be $49,000. As compared to a tax credit of $1,000, you would save between $0 and $370 based on your tax bracket.
Is it better to itemize or claim the standard deduction?
There was a time when you may have wondered whether it was better to itemize your deductions or claim the standard deduction before the tax reform in 2018. With the passage of the 2017 Tax Cuts and Jobs Act, that decision became a lot easier. When the standard deduction saves you more than itemizing, you usually do not itemize.
From 2017 to 2018, the standard deduction nearly doubled, making itemizing deductions harder to justify. A single taxpayer will be able to deduct $12,950 in 2022, and a married couple filing jointly will be able to deduct $25,900. To maximize your tax savings, you should calculate your itemized deductions and compare them to the standard deduction each year.