USA Tax filing

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Last Updated: Friday, 05 April 2024 21:30
Published: Friday, 01 April 2022 02:10
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USA Federal Tax filing:

Federal tax filing in USA is very simple. It's also free for the most part, and you don't need to pay anyone any money for that.

For US tax purposes, I'll assume a married couple with 2 children filing taxes jointly (married filing jointly on form 1040). Remember, that unless you and your spouse make more than $250K/yr, married filing jointly is very advantageous from a tax purpose, especially if there is huge disparity between the salary of the spouses.

As I've explained in my section "raising children for free", raising kids in USA doesn't cost you anything at all (unless your kids are spoiled). With tax credits and personal exemption for each kid, you end up getting about $1600 for each kid from the IRS when you file taxes. Browse through baby section to see how to keep your kids expenses within that.

See my tax section and the tax calculator, to figure out how much will you owe in taxes. For a salary of $100K, the calculator shows a tax of around $15K (or 15% effective tax rate). Taxes are your biggest expense in USA, and there's very little you can do to bring it any lower than this for a salary of $100K.

Filing taxes for free

In the past, a lot of websites use to file simple taxes for free. Some of these were big tax preparers, but now all of them have adhered to deceptive advertising, when in reality none of them file for free. Below are the big ones:

  • REAL FREE: These websites are really free for federal tax filing for everyone. State taxes cost money though.
    • FreeTaxUSA: This is one of those rare companies that do provide free tax filing for everyone. Not sure how long they will be able to do this, but as of 2022, tax failing is free for everyone, irrespective of the complexity of the return. Link is: https://www.freetaxusa.com/. Highly recommended.
    • OLT (online taxes): I've come to know that this site also provides free federal tax return for everyone. They do charge $10 for state tax return. Link is: www.olt.com.
  • NOT SO FREE: These websites advertise as free, but very simple returns qualify for the free federal returns. For most of us who make any decent money, and have investments in stocks, we won't qualify. Best to avoid these sites.
    • H&R Block: Most deceptive. They claim "File online, free online". However the free version doesn't allow 99% of the people to file for free. If you have HSA account, which is what everyone has, they disqualify you. Somehow if you are among the minority of people who don't have HSA, they trap you in investment gains/losses and/or dividend income. Almost all of America has some sort of brokerage account, so they disqualify almost everyone based off that. If that's not enough, they get you once again by disqualifying you if you own a home and pay mortgage/taxes on it and want to claim that on your tax return.  Never fall for this company.
    • Turbotax: They allow you to file for free, but at least they mention right there in small words "for simple tax returns only". That basically means "NOT Free"
    • TaxAct: They claim free for "simple returns", but have same exclusions as H&R Block.
    • CreditKarma: This is one of those companies thatused to provide free tax return filings. I used this service for couple of years until 2020. Starting 2021, they have changed their tax service to some app "Cash app taxes", which is free, but you have to download this app on phone, make an account, and then file tax return either on phone or on PC by using link "https://cash.app/taxes". I'm not sure I understand the logic behind downloading an app for tax return, when I'm still doing it on a PC. And who does tax returns on a mobile phone. Anyway they got bought by Intuit which is best to avoid.

If everything above fails, you always have the option of filing directly with the IRS. Here you have to manually estimate your taxes. There are 2 ways to file such tax returns:

  1. Electronic return: To e-file your tax returns, IRS website has link to " freefillable forms". Once you go to this link, and fill in al your tax details manually, you can file electronically. This is the link you use:
    1. https://www.freefilefillableforms.com
    2. Above website is very picky, and you have any blank, or any spelling error or anything so obvious, it will reject your return. It will give you a code for rejection, whcich you will need to search on IRS website. It will tell you what the source of error is. once you fix that, try again. It will then give you another error. You keep on doing this until there is no error. However, each time it takes couple of hours to know if the return was successful or not. So, plan for few days of frustration, before your return gets accepted.
  2.  Paper return: You can download the related forms from IRS website, fill in all your details and then mail those tax papers to IRS. This is not recommended, since it usually takes longer to process, and has the risk of getting lost.

 

 

Federal Tax script:

To assist in the process of figuring out your federal taxes, I started writing my own script for figuring out taxes. It's very simple program to write for 80% of the filings, as it's simple addition/subtraction. Of course, IRS rules change every  year, so you need to constantly modify the script, but it's not really something that should command billions of dollars in revenue. IRS spends billions of dollars on tax related assistance. It could probably spend few thousand dollars and have their own software on their website, which everyone can use to file for free. This will at most cost few thousand dolars as a high school kidd can do it. But they won't do it, since then they won't be able to feed this billion dollar industry.

Below is the link to the script.

 

Here's few tidbits: