Your 2025 tax questions, answered
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So it's that time again. Time to file your taxes. If you're getting a refund, maybe you've already done that. If not, maybe you're waiting until the very last minute. Either way, the deadline to file and pay what you owe is April 15th.

I will say pretty much everybody I know dreads the filing part because it involves paperwork and numbers, but also because it's scary. Most of us didn't learn how to do our taxes in school. And so you may worry you're not doing it right and that you're going to get hauled off in handcuffs because you forgot to report one of your 1099s. That isn't going to happen, by the way. So let's all take a big, deep breath together.

For this episode of Life Kit, we collected tax questions from listeners, and I posed them to two tax attorneys, Hanna Borikov and Leo Gabovich, partners at the firm Borikov, Gabovich & Associates, P.C. I asked them your questions and added in some more in the hopes that we could make tax time a little easier for all of us. ♪

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All right. So let's start here. When do you all recommend that people have an accountant file their taxes versus just doing TurboTax or FreeTaxUSA or one of the online softwares? In my opinion, if you've just got a W-2, even if you have a W-2 and let's say you have a few like common kind of deductions where you

You've got kids. You've got real estate property taxes, things like that. Even in those cases, the software today is so intelligent and easy to use. I tell people all the time, hey, just use that for yourself. There's no reason to pay an accountant hundreds of dollars when you could really just spend half an hour and just get it done for yourself. Where I highly recommend it is Instagram.

If you have your own business or even if you're a freelancer, you're on a 1099 basis, something like that, you want an accountant involved. Even if, you know, you're not breaking the bank, you want to have somebody who's knowledgeable, who'll guide you and set you up for success. Since we're talking about freelance, another question that came up is,

If you have freelance income, maybe it's a small amount, like $150 or something, and you didn't get a 1099 form for it in the mail, do you still have to report it when you file your taxes? And just explain, what is a 1099? In this case, when you're talking about a freelancer, it would be like an independent contractor instead of getting a W-2.

So you're not on a salary, you're not an employee, you're an independent contractor, you get what's called 1099. It is a form that will get sent to you in the mail if it's over a certain amount that was paid over to you over the course of the year. And you're supposed to use that to report when you file your taxes.

And it comes from the company that paid you that $150 or whatever. Yes. Yes. But they don't have to send you a 1099 if it was under a certain threshold, right? If it was under a certain amount of money. Right. They don't have to give you a 1099 if it's under a certain threshold. But if you're above the minimum filing threshold that you have to file a tax return,

Even if you didn't get a 1099, you're supposed to report all income that you receive. So yeah, even if you didn't get a 1099 for that $150, legally, you're supposed to report it. From a practical perspective, I wouldn't recommend people do this. But I have to say that, yeah, without a 1099 present, the IRS is not made aware of that transaction. If you want to take the risk of not reporting it, you can take that risk. But if you get audited, you would still have had to pay the tax on that $150. Yeah.

What happens if you don't report something like that, like 100? Like I'm talking about small amounts, you know, but like if let's say you got audited and and then the IRS was like somehow found out that you made $150 at this job. And like, what is the penalty? So in that case, I mean, the likelihood of an auditor scrutinizing $150 is extremely low because they're limited in manpower and they're they're not looking for 150 bucks.

they're looking for much larger sums of unreported income. I will say that not necessarily the $150, but I've absolutely seen taxpayers who might have missed, you know, $1,500 to $99 getting a letter in the mail saying, hey, you missed this and we've adjusted your return. So now you owe us, you know, another $300 or $400 in tax and

and interest and usually a co-equal amount of penalties by that point where it'll probably be another $400 in penalties. The good thing is cases that you mentioned before, if someone didn't get a 1099, they legitimately forgot about it.

They tell the IRS when they get that letter, hey, whoops, I didn't realize I had that 1099 on my W-2 or I've got so many 1099s, you know, something that's legitimate. The IRS is going to waive the penalty, but you still have to pay the tax. So that's kind of what it boils down to. I've seen a lot of memes around tax time that are like, the IRS is like, tell us how much you owe and pay us. And then you're like,

well, you know how much I owe. How much? And they're like, not telling. You guess first and then you pay. And then they're like, wrong. You know, like that's always that always has felt really strange to me. And I think to a lot of people, like, why doesn't the IRS just send you a bill? Right. Other governments, you know, other countries, some of them do do it that way, which sure seems intelligent to me. It

I think there are some benefits to the system that we have, especially for, you know, a lot of the not the typical W-2, you know, standard deduction filers. I think a big reason for why it is the way it is is because of lobbying. I mean, there's a lot of money in tax preparing. Honestly, I think the lobbyists don't want to push the IRS away from that.

And on that note, I mean, technically, if you don't file your return, in a lot of cases, especially if they have a 1099 and W-2 on file, they'll file what's known as a substitute return, which is just going to have exactly whatever they have on file. So if they've got a W-2, they'll assume that's the amount of income you made, and they'll give you the standard deduction, because obviously they're not going to go rooting around and deciding what deductions you'd be entitled to.

And that's that. But of course, the catch is that when you non-file, you get hit with all sorts of non-filing and late payment penalties and all of that. And the IRS really wants to encourage people to file to the point that

The failure to file penalties are harsher than the failure to pay penalties. So it sounds like the piece of advice for people around tax time also is you should file your taxes or you can also get an extension, right? You can file for an extension and you have until October of that year to file your tax return, but you still have to pay taxes.

Right. Which means you kind of have to do the work of estimating how much you owe. Right. But also you can amend your returns. Right. So if there's any sort of errors that you catch later on, do that. OK, got you. So if you filed and then you realized you forgot to...

include some investment. This happened to me, actually. I filed my taxes and then I had a certain kind of investment account for the first time and I forgot that you're supposed to report the income from that. And then I went back and amended my return and I sent the IRS more money. And then they sent me back the money and they said, no, no, you got it right the first time. And I was like,

No, I think you're wrong. And this is actually something that like someone emailed us about as well. They got money back from the IRS, but they're like, I don't get it. Why did you send me this money back? If that happens, if you file your taxes and the IRS or your state is actually like, no, you overpaid. Here's your money back.

That's the end of it, right? It's legally yours to keep even if you think that they're wrong? Well, they make mistakes too. So you can cash that check and put it in your bank account. And there could be a situation where they come back again months later or years later and say, we made a mistake. We're going to make an adjustment. They can make changes. And then you might owe again. And what I will say about that is that, you know, depending on the amount, you may want to get an attorney involved if it gets to that point.

All right. So another question. A lot of people are working remotely these days and they might live in a state that doesn't have an income tax like Texas or Florida. Right. But their company is located in a state that does have an income tax like New Jersey or New York.

And they're wondering, do I have to pay income taxes because my company is located in a state that has them? Yeah. So with COVID, there have been a lot of different regulations amongst the states. New York is particularly aggressive about it. So there's something known as the, at least in New York, as the convenience of the employer rule. And this kind of rule, from what I've seen,

What it effectively means is if you are working out of the state for a New York employer purely for your benefit...

you still have to pay those New York state income taxes. So somebody living in New Jersey remotely working for a New York employer, New York's position is going to be that, hey, you need to be paying taxes on this New York source income as they see it. Is that what's referred to as a non-resident income tax? Non-resident income tax return? Yeah. Yeah. Okay. So if you are...

being taxed by a state where you don't live, do you also need to pay income taxes in your home state? It depends on the state. What it really boils down to is, right, hey, should this income be taxable by our state? Is it being sourced from our state? And I guess that's the best way that I can kind of explain it is if you're trying to separate yourself from being taxed by a certain state that you might work in,

If at all possible, you'd have to kind of show why your income is not necessarily sourced from business in that state. Okay. And I should say here, you can often get a tax credit in your estate to offset whatever you paid in income taxes to another state. This stuff just gets kind of complicated. So another question for you, let's say you file your taxes and you realize, oh, I am not getting money back. I am not striking even. I owe money.

What can people do if they can't afford their tax bill? Yes. So if you can't afford to pay in full, which is a lot of people, there are options. So there's an installment agreement you can apply for. And there are different types of installment agreements. But with an installment agreement, typically it's what, 72 months is like max term. You divide how much you owe by that term. So that's just a straight payment plan.

There are also options if you can't afford to pay on a payment plan divided over a certain number of months, you can do what's called a partial pay installment agreement, which is not what you actually owe, but what you can afford to pay. Another option is what's called an offering compromise. So an offering compromise is a deal with the government where you say, okay, I owe $50,000. There's no way I can pay $50,000.

You actually compromise not just the tax, but the interest and the penalty. So the total dollar amount. And then there's also another option called currently non-collectible status. So if you have really, really zero dollars, you might have health issues. You know, let's say you're ill or let's say you're retired. You don't have income coming in. The amount is still owed. However, you're not making payments on it. They're not collecting against you. I'm wondering why.

What is the first step for somebody who realizes that they're in this situation? I mean, they might not have an accountant or a tax lawyer. They might just have, like, filed their taxes through an online software company.

Should they get professional help? Well, yeah. So it depends on how much that's owed and how much they have the ability to pay. If it's an amount that they think is manageable, they could set up their own payment plan online. They can always call. There is a phone number for the IRS. The wait times can be a bit long. And, you know, in terms of getting a tax professional involved, really depends on the complexity of the issue. So

You've got to think how much is it going to cost to hire an accountant, how much is it going to cost to hire an attorney versus doing it myself and how much that's owed. So you have to balance that. I just wanted to add that there's a wonderful resource both on the IRS and the state level known as Taxpayer Advocate.

They kind of oversee, you know, some of the functions of the IRS, the state tax department. And at least on the IRS level, they can even issue taxpayer advocate orders to basically say, hey, IRS, you need to help out a taxpayer. And the reason why I like taxpayer advocate is they're super straightforward. One page forms generally, hey, describe what your issue is and what do you want us to do about it?

And, you know, aside from the fact that they're super helpful, people think of the IRS as like this scary place, but...

And taxpayer advocate, they're your friends. You'll get an advocate assigned. They will call you. They will send you a letter, let you know what's going on. They're like the social workers of the IRS. Yeah, essentially. And the reason why I'm such a huge fan of them, too, is, you know, when I used to work at the state tax department, office of counsel was in this building. We were on one floor and taxpayer advocate's office was literally just hallway right across from us.

And I can't tell you how many times I had advocates literally walk up to me at my desk. Hey, you're working on this case or you've got this case coming down the pipeline before I even knew about it. And I'm helping this taxpayer. And here's the issue. And this is what we want you to do about it. And to have that kind of advocacy for zero dollars is phenomenal. That's really good to know.

And if someone does want to hire an accountant or a tax attorney for whatever reason, not necessarily because they owe money this year, but they're just looking for someone to help them with their taxes or a tax issue, how do you do your research? How do you find a good accountant or attorney? I would say look at their qualifications. Make sure that they are licensed because people had returns done by what they thought was a CPA, right?

was, in fact, a non-accredited individual that just... Just some guy. Just some guy. And, you know, that caused a lot of nightmares for the unsuspecting taxpayer that

hired that guy. So don't end up in that situation, but definitely look at the credentials of the person, of their firm. Is it reputable? And that's how I would look for them. Yeah. The only other thing that I would want to add is that enrolled agents are a great resource for some people. Enrolled agents are

individuals who are qualified to have taken tests before the IRS to essentially be tax preparers and represent people before the IRS. So you don't need to be a CPA, you don't need to be an attorney. And there are a lot of really smart enrolled agents. And, you know, I tell people to look for those as well, where if you're looking for an accountant and you might not need one or might not necessarily be able to afford the cost of what a CPA costs, you

enroll agents are a great option because they generally charge even less than the CPA does. And again, if you know that $250 or $300 for your return gives you that peace of mind, then great, pay an enrolled agent to help out. All right. Hannah, Leo, thank you so much for this. Thank you for having us. Thank you for having us. Okay, it's time for a recap. A few takeaways from our conversation.

One is to file your taxes by the deadline to avoid penalties and interest. You can probably do this on your own or using free tax software if you have a simple situation, like you just have a W-2. But you might want to hire an accountant if you freelance or own your own business. Number two, if you work remotely, pay close attention to the state tax laws where you work and where you live, because you might have to pay income taxes in two states. But in some cases, you can get a tax credit to make up for that double payment.

And number three, if you can't afford your tax bill, there are several options available to you. Payment plans, coming to a compromise with the IRS, non-collectible status. If you need help figuring all this out, you can reach out to Taxpayer Advocate. It's an independent organization within the IRS that can help you understand your rights, communicate with the agency, and figure out next steps. And if you're having problems with your state taxes, your state might have a Taxpayer Advocate office too.

For more Life Kit, check out our other episodes. We've got tips on lowering your next tax bill and advice on paying off your debt. You can find those at npr.org slash Life Kit. And if you love Life Kit and you want even more, subscribe to our newsletter at npr.org slash Life Kit newsletter. And just a reminder that signing up for Life Kit Plus is a great way to support our show and public media. And you'll get to listen to every episode sponsor free. So please go find out more at plus.npr.org slash Life Kit.

This episode of Life Kit was produced by Margaret Serino. Our visuals editor is Beck Harlan and our digital editor is Malika Gharib. Megan Cain is our supervising editor and Beth Donovan is our executive producer. Our production team also includes Andy Tegel, Claire Marie Schneider, and Sylvie Douglas. Engineering support comes from Patrick Murray. I'm Mariel Segarra. Thanks for listening.

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