Dutiful taxpayers in the USA have to file their Individual Income Tax Return to the USA. Each year millions of people have to be involved in a filing a return to indicate their income, claim a deduction and remittance of any tax due. Income tax laws of the USA are sometimes complicated and always changing; however, it can be said that there are many elements of it that can help you through the process.
The federal agency in USA that embraces these responsibilities of enforcing the taxes and collecting deems to be the Internal Revenue Service (IRS). Your Individual Income Tax Return predetermines the amount of federal taxes you have to pay or whether you are going to get a refund. Although tax deductions are made in the salary of many workers all through the year, there are those liable to pay more tax and there are those who may end up receiving tax.
The USA income tax laws are geared towards making the tax payer pay his or her fair share of taxes according to the income and other related factors. The amount of these laws is different in accordance to your filing status, level of income and your eligibility to the different tax credits and tax deductions. With a knowing vision of these factors and of proper methods of filling your returns, you can reduce the amount of tax you have to pay and prevent the mistakes, which prove to be quite expensive.
What is Individual Income Tax Return?
The form you file with the IRS and that indicates your income for the year, your deductions and credits and then determines the amount of tax you owe or the amount of refund you may be entitled to is the individual income tax return. All people who have attained certain income levels are obliged to pay a yearly return which should normally be paid by April 15 every year.
Most people file the income tax return through IRS Form 1040 as it is the standard form. Nonetheless, you might want to complete other forms or schedules subject to your financial condition.
Types of Income which are reported in Your Return
When completing your personal tax returns, you will be liable to list out different sources of your income which may include:
Wages and Salaries: For the employed you will report the amount of money you earn at work and this is usually supplied to you in form w-2.
Self-Employment Income: In case of self-employment, you will indicate the earned money as a business person and freelancer.
Interest and Dividends: in case you get money due to investments, you will be reporting interest income or dividends received.
Capital Gains: In case you sell your assets, which may include stocks or real estate you might have to declare the profit(capital gain) in your income statement.
The other income: This includes incomes such as rent income, retirement income, and unemployment benefits.
Important Procedure of Filing Your Individual Income Tax Return
Step 1: The first step is to make your tax documents ready.
Before you sit down and start filling your personal income tax return form, you should have all the documents that you need such as:
W-2 Forms: The forms indicate your earnings with the employer and taxes paid.
1099 Forms: You could also be receiving form 1099 which is possible in case you are self-employed or earned income through other means such as freelancing and investments.
Receipts of Deductions: Save the receipts of the expenditure that you can deduct, e.g. medical expenses, mortgage interest, and contributions to charities.
Social Security Number (SSN): Your SSN is basic in submitting your tax.
Step 2: Make a selection of filing status
Your filing status will identify your tax rates and you will be eligible to a number of various deductions and credits. The number of filing statuses that can be chosen in the USA is five:
Single: Single people are those not married or operating legally.
Married Filing Together: This is best applicable to couples who have their marriage registered.
Married Filing Separately: This happens to be the status of the married couples who elect to file separately.
Head of Household: Unmarried people who provide support to a dependent.
Qualifying Widow(er) with Dependent Child: It is for those who have lost a spouse, and have a child.
The main thing that you should do is to select the correct filing status so that you can benefit through taxes. Make sure to pick the one that demonstrates the circumstances of your own position.
Step 3: Declaration of your Income
Once you decide the type of filling, the second thing is to file the individual income tax returns by reporting the income sources. The IRS asks you to report your income received in wages, self-employment, investments and other sources subject to taxation. Fill the correct forms e.g. the employment income of 2 forms of W-2 and the freelance or investment income of 1099 form.
Step 4 Claim Deductions and credits
Deduction and credits are one of the most significant components of your personal income tax filing. Deductions are subtractions in the amount of your taxable income, whereas credits decrease the taxes that you will be obliged to pay.
Common Deductions
Standard Deduction: IRS also offers the so-called standard deduction depending on your filing status. This is a deduction that automatically comes unless you opt to deduct your deductions separately.
Itemized Deductions: You can itemize your deductions including mortgage interest, property tax, medical expenses, and charitable contributions in case the amount of your eligible expenses surpasses those of standard deduction.
Retirement Contributions: IRAs and 401(k) plans are retirement accounts that you can deduct contributions you have made in that account.
Short-hand Common Tax Credits
Child Tax Credit: In case you have any qualifying children then you can qualify in child tax credit which can help in making your tax accordingly decrease.
Earned Income Tax Credit (EITC): The EITC is a credit that aims to support low- as well as moderate-income people and families and depends on your income and the number of children.
Education Credits: In case you or a dependent individual is getting higher education you can take education-related credits like American opportunity credit or Lifetime learning credit.
Step 5: Mind Your Taxes Paid or Repaid
After reporting your income, allowing yourself deductions and claiming your credits, then the thing to do is compute how much tax you have to pay or are you getting refunds. Your tax liability will be determined by your filing status and tax brackets concerning the available tax on your taxable income.
Step 6: File and Pay any Due Taxes
After filing your own income tax, you should hand in the tax processing to the IRS. The IRS uses diverse ways of paying including credit cards, fund transfer and even checks.
The Top Ten Mistakes to Refrain Doing On Your Individual Income Tax Return
Late Filing: Never file late under the individual income tax law or you will be assessed with penalties and interest. In case of the impossibility to file by the deadline, you should expect an extension.
Wrong Filing Status: Using an improper filing status may affect your amount of tax. Make sure you are eligible then choose your status.
Missing Deductions and Credits: Don not forget to claim all the deductions and credits to reduce your amount of taxable income and the amount of taxes you will have to pay.
Math error: If simple math errors occur, the result will cause delays or penalties. Alternatively, you should go over the calculations carefully or use a tax program to make them precise.
Frequently asked questions (FAQ)
Q1: When must an individual income tax in the USA be filed?
Your individual income tax is normally due on April 15 of each year. In case you did not have enough time to fill it out, you may ask to have an extension which will provide you with a deadline at October 15.
Q2: Is it possible to file my Individual Income Tax Return Electronically?
Yes, e-file is one of the options provided by IRS to file your individual income tax three electronically. This is the quickest and safest mode of making submission of your tax return.
Q3: What document should I include during the filing of individual income tax returns?
You will require forms like your W-2 (wage), 1099 forms (other sources of revenue), the recepts to your deductions and Social Security Number (SSN). Make sure that you have collected any applicable tax forms prior to beginning to file the tax returns.
Q4: how do I minimise my taxable income on my Individual Income tax Return?
A4: You will be able to maximize your tax paying taxable income by taking up deductions such as the normal deduction, mortgage interests, and retirement investment. You can as well be eligible to tax credits that directly lower your tax liability.
Q5: What is the case when I screw something on my personal income?
In case you do it wrong, IRS will normally inform you. It is quite possible that you will have to submit a correction to the reportage of the error on an amended return. You must not make an error; therefore, re-read your information or make use of software to complete the tax.
To get additional information and extensive advice on Individual Income Tax Return and other provisions related to the income tax legislation in the USA visit Tax Laws in USA. Keep yourself updated and make sure you are filling your taxes properly not to have problems with IRS.
