Essentially, you likely owe the government a portion of your income and earnings. Income tax is usually withheld from each of your paychecks by your employer throughout the year, based on what you'll probably owe. Certain factors can affect how much you'll owe, such as your marital status, the number of dependents you have, and tax breaks that you're entitled to claim. Using tax software is one of the easiest ways to prepare your tax return. These programs ask you some questions and fill in the appropriate forms for you based on your answers.
Preparing your tax return yourself can be cheaper than paying someone else such as an accountant to prepare and file your taxes. You might consider choosing tax preparation software from a company such as TurboTax or H&R Block, both which offer low fees and sometimes free deals. These services usually offer tax support and advice as well.
Your tax filing requirements depend on a few factors including filing status (i.e. single, married, head of household), age, and gross income. If you're single and under 65, for example, as of the 2020 tax year, you were required to file if your federal gross income was $12,400 or more. If you’re 65 or older, you were required to file if your federal gross income was $14,050 or more.
Generally, interest accrues on any unpaid tax from the due date of the return until the date of payment in full. If you owe tax and don't file on time, there's also a penalty for not filing on time. The failure-to-file penalty is usually 5% of the tax owed for each month, or part of a month that your return is late, up to a maximum of 25%.
The short answer is yes, e-filing is very safe for submitting your tax returns. E-filing is more secure than mailing a tax return via snail mail, because the data in an e-filed tax return is specially encrypted for extra security. Encryption prevents any access to data as it moves between your tax software and the IRS or state tax agency.
The deadline for your annual personal return is normally April 15, unless it falls on a weekend or a holiday, in which case your taxes would be due the next business day. You have until October 15 to file your return if you file an extension. Just file IRS Form 4868 instead of your tax return, on or before the original filing deadline. The extension is automatic—you won't have to wait and hope for a nod of approval from the IRS.
E-file is the term for electronic filing or sending your income tax return from tax software via the internet to the IRS or state tax authority. With e-filing, you can file your taxes from anywhere, including the comfort of your own couch. Tax data can be sent any time before the deadline, day or night, according to your own schedule
A taxpayer's filing status is important to determine filing requirements. The IRS offers five filing statuses to choose from (you can only choose one when filing): Single, Married filing jointly, Married filing separately, Head of household, and Qualifying widow(er)
Anyone who receives income that doesn’t result from an employer/employee relationship might expect to receive a copy of a 1099 form, depending on the amount of that income. A Form 1099 is issued to self-employed individuals, to taxpayers who have received interest or dividends from investments, and to people in any other circumstance where payment has changed hands.
The alternative minimum tax (AMT) is an alternate method of calculating income tax liability. It takes away some common deductions to arrive at a taxpayer's alternative minimum tax income. However, a taxpayer must calculate their taxable income both ways, once according to ordinary Internal Revenue Code (IRC) rules, then again using the alternative minimum tax methodology, and pay whichever is more.
Form W-2 is the annual "Wage and Tax Statement" that reports your taxable income earned from an employer to you and to the IRS. The form also includes taxes withheld from your pay, as well as Social Security and Medicare payments made on your behalf by both you and your employer. All these taxes are withheld from your pay and submitted to federal and state taxing authorities on your behalf.
Tax credits subtract directly from what you owe the IRS as you complete your tax return. The may even be more beneficial than deductions because they're applied dollar-for-dollar to your tax debt for the year, and some can even result in cash back. Others can be carried forward to subsequent tax years.
A standard deduction is a portion of your income that you can set aside tax-free to help meet your living expenses. You can deduct the amount of the tax year's standard deduction from your taxable income on line 12 of your Form 1040 tax return. Standard deductions are based on your filing status (Single, Married, Head of Household, etc.).
An itemized deduction is a tax-deductible expense that you paid in a tax year. Only specific expenses defined by the IRS can be itemized. Itemizing involves reporting your expenses for specific types of allowable deductions, adding them all together, then entering that total on your tax return.
IRS Form 1040 is a tax return used by individual filers. The 2020 version of the form is its third major restructuring since tax year 2018. The 2020 version continues to replace Forms 1040-EZ and 1040-A, which were eliminated from the tax code in 2018.
Form 1040-SR is a version of the 1040 tax return that was created specifically for use by senior citizens. The Bipartisan Budget Act of 2018 required the IRS to create a tax form that is easier to read and use for individuals aged 65 and older, which resulted in the 1040-SR.
IRS Form 8949 is a tax form primarily used for reporting sales and exchanges of capital assets. Form 8949 is filed along with Schedule D of your individual federal income tax form.
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