The Internal Revenue Service will never contact you via email. Period. However, a very good scam artist will certainly try, and a good way for them to do so is to pretend to be the IRS in order to gain access to your banking information. In the past month, I have gotten three emails purporting to be from the IRS regarding a Federal tax payment having failed or been rejected. They look totally legit, if you don’t look carefully and not at the “Reply-To” address in the header, and I can see how many people would instantly click on the link in the email in order to rectify this failed payment. After all, no one wants to get in trouble with the IRS! This is what the latest email I received looked like:
Just because your income puts you in the X or Y % tax bracket, that doesn’t mean that is really what percentage of your income you pay in taxes. We actually have a progressive tax system in place in the US, where you are taxed at different levels as your income increases. I wrote about the 2010 tax rates before on the site, and will discuss them a little later, but people often have the misconception that if their income falls in the 25% tax bracket it means that they pay a full 25% in taxes. This is simply not the case, and I wanted to put together a little post to explain how the tax brackets actually work. Throughout this post, I will use the figures from the “Filing as a single” tax brackets, as that is how I file:
If you don’t have your taxes taken out of a paycheck, guess what – you have to pay estimated taxes to the IRS and your home state every quarter of the year. And even if you have taxes taken out of your paycheck, but you don’t have enough taken out to cover your paycheck or any extra income from self-employment work, interest, dividends, alimony, etc., well, you also need to pay estimated taxes. If you don’t make the quarterly estimated payments or pay enough taxes through regular withholdings, you also may be charged a monetary penalty – even if you don’t owe anything when you file your return for the year. Hooray for the tax code! I have been paying estimated taxes for the past 5 years, as I have been mostly self-employed, and it’s not as bad as it seems to be – you just have to make sure you set aside enough money to make those quarterly payments. That to me was the most difficult thing to get used to; it takes discipline to take out a percentage of each and every dollar that comes your way and sock it away for quarterly estimated payments. I set up a separate account inside my ING Direct account labeled “Taxes”, and it eventually became habit that I no longer really think of.
Since we are half way through 2010, I figured now was a good time to check out what the 2010 Federal tax rates were so you still had 6 months to make any changes to your withholdings if necessary. Every year there are always small changes to the absurdly wordy tax code, and 2010 is no different. (Good thing I have my brother, an accountant, to keep track of this stuff for me!) So if you were wondering, here are the marginal Federal tax rates for 2010, along with some other small changes that you may not have even noticed.
You may start seeing services offering to help you extend the IRS tax date of April 15th, giving you more time to file your taxes. Some of these companies will actually charge you a fee… for something you can do on your own for free. For individual filers, if you are not able to file your federal individual income tax return by the due date, you may be able to get an automatic 6-month extension of time to file. To do so, you must file Form 4868, Application for Automatic Extension of Time To File U.S. Income Tax Return by the due date for filing your calendar year return (usually April 15) or fiscal year return. For details on filing extensions with special circumstances (military, out of the country, etc), check out the IRS page dedicated to these extensions. But please, don’t pay a company to do it for you – it’s free and available to most everyone.