 Income tax 2023-2024. Free tax tools. Get ready and some coffee so you can recognize the code cracks when doing income tax 2023-2024. We would like to take the opportunity now to point out some possible free resources, free resources that might be useful to follow along in this course, although not required, free resources that could be useful in practice, free resources that you might be able to give as advice to others who have particular income tax needs. The first one, one we saw in a prior presentation is LASERT tax software. This is the software we will be using in the demonstration problems. You don't need access to the LASERT tax software to follow along. It's not going to be a course on the data input in LASERT tax software, but having tax software so that we can tinker with the tax code by running scenarios is a really useful tool for understanding. You might be able to look into the free trial on the LASERT tax software as well as some of the other softwares we've kind of touched in on in prior presentations and we'll look at here shortly. Then we can jump on over to the IRS website. So irs.gov, irs.gov is the IRS website. So IRS has IRS free file, do your taxes for free. They've been promoting this for a few years now. In the last couple years, they really promoted it hard since the changes happened with COVID and they still have it at this point in time. So if you search for the IRS free file, you will generally find it on the IRS website, irs.gov, irs.gov. Option number one, guided tax software. So for adjusted gross income of 79,000 or less. So in other words, if your income is below a certain threshold, you might have access to free software, the software not being provided by the IRS website. It's not being provided by the government. The government has come up with some kind of deal leveraging some kind of deal with the private software creators. And if you qualify, one of the qualifications being your income below the 79,000, first a word from our sponsor. Yeah, actually, we're sponsoring ourselves on this one because apparently the merchandisers, they don't want to be seen with us. But, but that's okay, whatever, because our merchandise is better than their stupid stuff. Anyways, like our crunchy numbers is my cardio product line. Now, I'm not saying that subscribing to this channel, crunchy numbers with us will make you thin, fit and healthy or anything. However, it does seem like it worked for her. Just saying. So subscribe, hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com, then you might be able to get access to that software for free. That kind of software is generally going to be software that is not the business or professional software, but individual software, not to say it's not good or anything or not as good as the professional software, but the objectives are different as we saw before. LASERT software, for example, being a software that would be used in a firm, having less of an interview process, an easier and faster data input screen so you can crank out more returns, which is actually great for tinkering with the tax code, making different changes. The individual software usually being designed to have an interview process so that you're interacting with a series of questions, mirroring what might happen if you were to go and talk to a tax preparer in person. So let the software do the work. It says it answers simple questions. That's because it's in an interview format. Choose between trusted IRS partners you qualify for, accurate math calculations guaranteed, free state tax preparation and filing with some trusted partners. Prepare and file your federal return in Spanish possibly as well. As far as a practice tool, if you use this software and you can get access to it for free and like run scenarios in the software and then use it for your own practice purposes, possibly that could be something that you can look into. I'm not sure I haven't done that myself, but you might be able to run and use that to kind of tinker with and run scenarios with possibly. Option number two, the fillable forms. Now the reason I have like the EU Yuck picture here is because I don't normally recommend using the fillable forms. You can look up the forms on the IRS website that I highly recommend. So if you don't have access to software and you're following along with our course, for example, then you could just look up like the form 1040 the related schedules all the schedules all the instructions on iris website iris.gov iris.gov and you'll you can kind of follow along where the data input is happening on those forms and get more of a holistic view of the form and the instructions. You just can't jump back and forth between the data input that will then populate the form as easily and quickly as if you used software. Now the thing with the fillable forms is usually if you were going to do your own taxes, if your income is below 79,000, then you might have a more easier tax return, although that's still getting up there. More higher income tax returns typically are more complex tax returns because you might have multiple income sources, multiple family member members and dependents and so on and so forth. Although low income tax returns can be complicated as well because of all the credits as we'll jump into later. So but if your income is above that threshold, then you then you could jump over to the fillable forms. And I think the IRS is saying we're going to allow you to do a free option. Look, everyone can do a free option. That's what the IRS would like to claim. And they can claim that basically. But I don't think you would really want to use the fillable forms if your income was above 79,000, because the income level is an indication that you have a more complex return. So if your incomes below 79,000, you want to use sometimes a software for sure and possibly still go talk to a tax preparer so that you can give some some actual advice about the tax preparation in terms of planning and not just preparation. If your incomes over 79,000, then you're probably at a level of complexity where you want more than just the tax preparation. You probably want some kind of tax planning and that kind of thing. And therefore, I would think it would be useful at that point at least to purchase the software to make sure that you have the double check the internal control of the software to help you with the diagnostics to lessen the chance of making errors. And possibly at that point actually go to a CPA firm or a tax preparer with the idea that you're going to try to settle set up a long term relationship with someone because the tax preparer then can then help you out with the current tax return, but can also help you out basically going forward in the future, possibly doing tax planning, which could be a major resource, especially for higher income individuals. And you might be more likely to get an audit or something like that if you have higher income situations because your tax code is more complex. And it would be nice if you had a tax preparer that could help you out in those situations as well. So that's why I don't really like I don't really think the fillable forms has a much of a role because if you're under 79,000, you're going to use the software free software or get a tax preparer. If you're over 79,000, then I would think that you'd still want to pay for the software at the least or possibly go to a CPA firm at that point due to the fact that your tax preparation and planning is complex to the point where you would need to the fillable forms is kind of like doing the taxes by hand, which because of the complexity in the tax code, because the tax code has become more complex over the years as all these resources have allowed it to be like software, you don't typically want to do it's kind of like payroll, you know, you almost have to have some other system that's kind of helping you with the data input or else, you know, you're you're way more likely to make errors or miss certain opportunities that you would be picking up with the tax software. Okay, so you do all the work using your instructions available for any income level, no guidance and limited calculations provided, no state tax preparation and filing. That's another issue with this one. The state tax preparation is going to be important if you're in a state that has income tax, that'll depend on the state that you're in. Okay, so then we're going to we're going to focus over here on the free software. Now, if you go to their to the free software that is available and just look at the lists of the software, not all of them have that limit of 79,000 or less of the AGI, you can see here, the free tax USA, AGI 45,000 or less, not 79,000. And so age any free and all states, that's a huge one because some softwares might not have the capacity to do all the states given the fact that the states are more complex because the states could differ from state to state. Whereas with the federal taxes, it's the same over the whole country for the most part, there still could be like state influence in terms of the cost of living and whatnot in certain calculations, but it's basically so state return free and all states earned income tax credit included if AGI criterion is met. So the earned income tax credit is another credit which is quite complex, even for low income individuals. So it used to be that your low income tax return was quite easy. But with all the credits that are in place these days, the main ones being the child tax credit and the earned income tax credit and them having a refundable portion as well as possibly a non refundable portion in some of these credits, it starts to get quite complex. You intertwine the earned income credit also with filing status, number of children, number of dependents, then it starts to get quite complex. So some of them actually don't have the earned income tax credit, which I think would be very important if your income is below a certain threshold and you would qualify for the earned income tax credits. So I think they have an interview process here, like a little thing that will recommend the software, but just recognize that you don't have access to all the software just because it's under $79,000. You also don't have access to all the proprietary softwares out there. You'll note here that into its owner of QuickBooks software, TurboTax, I don't believe is on here at all, which is interesting. You might check out TurboTax, they might have a free option if your income is below a certain threshold as well. But these are proprietary softwares, they're not like government soft, they're not made by the government, the government somehow has a deal with them. And so that's the idea. So this one, I don't, I haven't used these, I use mainly Listert. So free now under $68,000 free in some states. This one's only between, well between $17,000 and $79,000 included if that's kind of a weird one. So if you're below $17,000, no. And then you've got the IRS free file program. This one has the $79,000 or less free in all states. Make sure that it's picking up your state requirement if you're looking into these free options, because you don't want to file two separate softwares, one for the state and one for the federal, typically, unless the state gives you like a free option or something like that. The one that has the coolest name, of course, is Tax Slayer. Tax Slayer, but it's $44,000 or less, I've never used it. So there it is. And then A-L-O, and then here's my image for Tax Slayer. He's slaying the taxes. Tax Act and file for taxes.com. So these are not the only options you have. I can't vouch for any of these softwares. I've never used them. You might want to, you could look at Intuit's TurboTax, H&R Block, I think has a standalone tax package as well. Those are probably the biggest two in terms of name recognition. And I would think they would be pretty good given the fact that, again, Intuit is a big company and probably has more people. So it's, again, it's kind of strange that they're not in the program to me here. So you might look at their stuff and see if they have a free option as well. I tend, I would tend to trust them a little bit because I work with LASERT, which is now owned by Intuit. I'm not saying Intuit's the best out there, but they're big, right? They're the big one. So anyways, what else do we have? We got the Tax Withholding Estimator. Now the Tax Withholding Estimator is designed to help you to make the proper withholdings, but it can also be used as like a practice tool to kind of estimate your taxes in different scenarios, and it basically has to be like a projection type of tool. So let me do a quick recap on how this works and why you might be able to use it. Note that we file the taxes after, by April 15th, following the year that we're working on. So if we're looking at 2023 tax year, we're going to file it in 2024. But note that the design of the tax system is similar to the design of payroll taxes in that the form shouldn't actually result in any refund or payment as it was originally constructed. Basically the original thought process was we're going to have you pay throughout the year as you earn the money, and then when you file the tax return in the following year, you're just going to say, hey look, this is the taxes I owe, here's my recap of the income that I earned, and I've already paid you the money, and therefore it's just an informational return. That's what basically happens on payroll taxes, although on a quarterly basis for the Federal Income Tax Social Security and Medicare on form 941. You don't typically have a payment or refund when filing those returns, you're just recapping. However, the tax code became so complex that that's impossible to do. So you can't really guess exactly what the amount of tax that you're going to owe is, because there's too many variable components in calculating the income tax. So what are you going to do then? So they're going to say, you still have to pay during the year, because the IRS wants their money as you earn it, not after you earn it. And they also are skeptical, I would think, that if you wait till you actually owe the money, you're not going to have the money because you would have already spent it. So they want to take the money away from you before it even gets in your hands, right? That's kind of seems to be kind of the plan here. So that means that you're going to be paying through W two withholdings most likely and 1099 and possibly estimated payments throughout the year. And what you'd shoot for what you try to do is pay a little bit too much. And why do you try to pay a little bit too much? Not just because you want a cool refund at tax time. The IRS, the IRS tries to then claim as though they're the one giving you money at the end of the year. No, they're refunding. They're refunding your overpayment. They overtook the money before. Why would you shoot for a refund? Because you don't want to get hit with the penalties. That's the idea. So if you underpay, they hit you with the stick of penalties and interest, which you're trying to avoid. So you try to overpay a little bit and all the tables that we use for the W two withholdings for payroll taxes when you calculate your W four and so on are designed to be a little bit over so that so that you will get a refund, not just to make you happy, although that might be part of it from the government's perspective, because they look like the good guy, giving you money back and the employer looks like the bad guy, because they're the one forced to be the tax collector. But the real idea is that you're trying to avoid the stick of penalties and interest if you underpay. So so it used to be like you can kind of say, well, if I'm married and I have so many dependents, I can get a reasonable calculation based on my W four will help me out with the tax tables and I can figure that out. But and but now it's got a way more complex in part because the family structures are kind of different. And the credits and whatnot earned income tax credit, child tax credits are dependent on marital status and number of children and that kind of stuff, which really, you know, complicates things. So at one point in time, if you had a family unit, most families had like a one income family, and it was pretty like a married couple, one income family or someone a single, that's pretty straightforward. And they have one job, right? But these days, people often have multiple jobs, right? You're probably working, you might have worked three different jobs throughout the year. And then also had gig work or something like that and have a spouse also doing a similar type of thing. And then you could have, you know, the number of dependents fluctuates a lot more as well. Therefore, it's a lot more hard. It's a lot more difficult to figure out exactly what your withholdings will be. So you really need what you really need to calculate the withholdings is a projection software, you basically need tax software in order to make a projection out into the future, to try to figure out what your withholdings should be. And that's basically what they did on the IRS website. So now you can figure out your withholdings, you might want to look at it at the end of the year, put in all the information in there, which is basically making a projection, which will then help you to determine what your withholdings should be, which you can adjust at the end of the year, or whenever you need to, to get the proper withholdings out of your W twos or the proper payments that you need to make to avoid getting hit with the penalties and interest. Now, because it's becomes, you know, basically a software tool, though, you could you might also use it in the course or something like this or to do projections into the future to run different scenarios, you can use it similar to using LASERT in other words, you can put in the certain assumptions into the tax software and and allow it to give you a projection into the future possibly. So it's a pretty interesting tool. They've it's a lot better than it used to be. So you might want to check that one out. So what you need to have this ready. So obviously, in order to figure out your withholdings, you would need the pay stubs for the job. Why the pay stubs? Because you don't yet have the W twos, because the idea with the withholdings is you're trying to figure out the withholdings before you get the W two, because you're trying to pay your taxes before the end of the year, before the tax return is due to avoid getting hit with the stick of penalties and interest. So other income info. So if you have gig work, like YouTube income, self employed income, you're selling you're selling ETF, you know, some kind of digital currency stuff or whatever you're doing, then you need to include that as well because and then most recent tax return is something that would also be useful to help, you know, answer the questions on it as well. Your information isn't saved. So this is not something that the IRS should be tracking and holding on to. It's supposed to be a tool to help you to calculate your withholdings. So it's not like a permanent type of thing. It's a it's an estimator tool. So how so how it works, use this tool to estimate your federal income tax withholding, see how your refund, take home pay or tax due are affected by withholding amount, choose an estimate withholding amount that works for you. So obviously the goal if you if you go into there and you say, how much do I need to be withheld, then they're going to adjust the withholdings. If you have to withhold more to pay the appropriate amount of tax to avoid getting hit with the stick of penalties and interest for paying too little tax, then obviously that means that the checks that you're going to be receiving are going to be lower because you're the they're going to force your employer to take the money away from you before you receive it in your paycheck, right? So that's that's the idea. So the tradeoff is to say, do I do I want to try to have more of a cushion to avoid getting hit with the stick of penalties and interest, possibly getting a larger refund or shooting for a larger refund to be safer? And which case I'm going to have less money from paycheck to paycheck, because they're going to withhold more of it, or do I want to really cut it, cut it us cut it tight, so that I can try to get exactly what I think my tax will be to try to maximize the amount that I'm going to get from paycheck to paycheck by reducing the withholdings to as low as I can get it without getting hit too hard with penalties. All right, recommended by iris also we have the forms. So remember that this could be really useful to follow along with the course, especially if you don't have access to software, the iris website has all the forms and all the instructions. So iris.gov, iris.gov, any form that we are looking at, such as the 1040, you could just type in form 1040 or go to the forms, look up the forms, look up the schedules, it'll give you the forms and the instructions related to those forms, huge resource. Also when you're doing research, it's a great resource. And we'll talk more about the types of things that you might go to for tax questions. But one of the first places you might go would be the instructions for the 1040. So if you're saying, should this be included in income? Or should this be a deduction or something like that? One place you might start going is to the instructions, although that's not like formally the tax code, right? But it could lead you, instructions could then lead you to where you need to go from there. And depends how complex the question is in terms of how much more detail you need to get. In other words, the instructions are usually created in more like a common language, less like legalese kind of language, although still kind of legalese to a degree, but less than the actual income tax code, right? But if you have to do more research, then it might take you, it might show you where other publications are and whatnot and possibly to the code itself. If you have more nuanced questions, you need to drill down on, we'll talk more about that later.