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 It is where you will choose how you want your taxes withdrawn.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.
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.
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