Tax Return Help – What You Need To Know Before Filing Your Own Tax Return

When filing your tax return, you need to know three things –

1. How to categorize yourself as a taxpayer. This will include your filing status, age, and eligibility for certain forms.

2. When to pay up.

3. The deductions and credits you are eligible for.

As a taxpayer, you can choose from several filing statuses – single, married filing separately, married filing jointly, and head of household. If married, it is best to file jointly to avail of certain benefits and lower rates.

The three forms available to taxpayers are the 1040, 1040A and 1040EZ. The 1040 is the “long form”, or the parent form from which the 1040A is a shorter version, and then the 1040EZ is a simplified, even further shortened version. The last is a fine choice for salaried workers under the ages of 65 who do not need adjustments to income. But people in other occupations need to look carefully at the instructions on the forms to figure out the categories they fall under.

The dates for filing a tax return are from January 15th to April 15th of the financial year, which can be extended up to October 15th of the same year with Form 4868 and a small penalty. If you think you do not have the money to submit a check for your tax payment, file the form 4868 – it reduces your penalties from around 5% per month to a tenth of that amount.

Also, try to e-file rather than mail by post if you are filing very close to the last date. There is really no way to ensure that your mail will arrive on time, but e-filed returns get delivered and accepted or rejected instantly. Rejected returns come with suggestions on how to remedy them, so avail of these and resend the corrected form.

Finally, keep eyes and ears open for the deductions and credits you are eligible for. Deductions or exclusions are sums of money that are subtracted from the individual’s gross income to arrive at the taxable income. Credits, on the other hand, are subtracted from the value of the income tax itself. As a result, a $100 credit may be as valuable as a $1000 deduction.

The Standard Deduction is deducted from Adjusted Gross Income of an individual before computing tax, and the Earned Income Credit can be availed by most taxpayers. Taxpayers may choose to avail of itemized deductions instead of the standard deduction if their deductions from the allowable item list far exceed the standard deduction amount. Also, tax credits can be gained for expenses on education, retirement plans, real estate purchases and so on. The exact rules for deductions and credits change every year, so taxpayers should always keep themselves informed about the latest developments.

In order to file a tax return yourself, the best thing to do is to use tax preparation software. This will keep you from getting confused by complex forms, will perform the necessary elementary calculations, and will allow you to submit a well-made tax return with minimal fuss and maximum efficiency.

Six Essentials That You Must Know About Irs Form 1040

The dreaded IRS Form 1040: it is a large wall of text crammed together with various blanks for entry of information that seems like it should be written in Greek or Farsi or some other hard-to-understand language. Seriously, why does it have to be such an intimidating document? For the layman, there is the fear of doing something wrong and having to face the consequences in the form of an audit. In fact, that’s probably the average citizen’s greatest fear around tax season. But if you take a moment to break it down and not let the purpose intimidate you, it’s really not as bad as you might be thinking. And the longer you spend in the workforce, the more simple it becomes – a necessary annoyance in order to reconcile your taxes, avoid audits, or, hope of hopes, collect your refund.

IRS Form 1040 can basically be encapsulated in the following six easy-to-understand sections:

1. Filing Status: This is a small but important section. It is where you will choose how you want your taxes withdrawn. There are five options: single, married but filing jointly, married but filing separately, head of household, and qualified widow(er) with dependent child. Each option has a different withholding scheme that your tax accountant can explain more thoroughly.

2. Exemptions: Exemptions are those individuals you may claim that can help shave off tax liability based on their level of dependency on you. Children are the most common (and valuable) exemptions you may claim, and they often make a significant difference in the final amount you will either owe or receive.

3. Income: Here is where you must be prepared with your W-2 information. How much reportable income did you earn throughout the year? This can be your hourly wage totals, your salary, and any tips or bonuses you might have received throughout the year. Also, did you have any taxable (or tax-exempt interest)? Essentially, this section is an overview of all your streams of income. The fewer you have the simpler this section will be; but that doesn’t necessarily mean it will be more rewarding.

4. Adjusted Gross: Did you have any expenses throughout the year that may be able to reduce your level of taxable income? If so provide that info here. Don’t worry. The form breaks it down line-by-line asking you simple questions about your situation. Some of the possible factors that can reduce your taxable income: educator expenses, health savings account, IRAs, student loan interest, and tuition and fees.

5. Taxes and Credits: Own a home? Have a child? The government gives credit for these kinds of large expenses, benefiting you in the final amount you will be responsible for by your tax deadline. Any reputable tax accountant will not close the books on your filing until you receive credit for these kinds of big expenses.

6. Other Liabilities and Credits: The government also gives special consideration to first time homebuyers and government retirees. This section alludes to those credits and also tallies what your tax responsibilities are for things such as IRAs and self-employment.

Always seek the aid of a professional before submitting your tax filing if you are unsure. But don’t be afraid of IRS Form 1040 because it simplifies a complex but important part of citizenship. The form is your friend. Learn it. Become a more informed taxpayer. And maybe future tax season won’t be so stressful.