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.