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How to File your Income Taxes

Preparation for Doing Taxes

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How to File your Income Taxes
How to File your Income TaxesSince 1913, when the states ratified the 16th amendment that gave Congress the authority to collect a federal income tax, people who work in the United States have given part of their paychecks each year to the federal government. This tax is known as the federal income tax, and it is important to file a yearly tax return that verifies that yours has been paid.

You file your returns with the Internal Revenue Service (IRS), a branch of the Department of the Treasury, which is the federal tax collection agency for our government.

Who Pays Taxes

There are four main categories of taxpayers in the United States:
  • Individual taxpayers who pay on income from their wages and investments
  • Small businesses and the self-employed
  • Large and mid-size businesses (corporations with assets of more than $10 million)
  • Tax exempt and government entities: this includes charities and certain government entities.
Most likely you will be from either first or second category above when filing.

When Taxes are Due

Taxes must be filed by midnight on April 15 of each year. If you have a special reason for not being able to file by then, you can request an extension from the IRS by filing Form 4868 and then must file within four months, or by August 15th. Any tax payments due by April 15th will be due then, along with interest, if you get an extension.

Preparation for Doing Taxes

Find out your tax status

This will vary if you are a resident alien, nonresident alien, or are exempt for tax purposes.

Get the correct forms to submit to the IRS from your local library, post office, or go online and download and print them. If you are a resident alien, you would fill out Form 1040, while if you are a nonresident you will file Form 1040 NR. If you are exempt, you will file Form 8843.

Gather Together Documentation

Get together the papers and documents you will need to do your taxes. You will need the numbers for your visa, your passport, and your social security number or ITIN number when filling them out.

Most employers will withhold the estimated taxes from your paycheck during the year, and will send you a form (the W-2 form) that shows your earned income for the past year, and how much tax was deducted from your pay. You will send in an original of this W2 form when you file your tax return. Be aware that this is only an estimate of your taxes that was withheld, and in some cases you may not have paid enough and could have to pay more. In other cases, too much tax is withheld and you may be eligible for a refund from the government.

If you are self-employed, you will need your Form 1099 that shows your income. If you have income from investments and dividends, you will also need to report this on the 1099-B. If you receive royalties or rental income, this is also reported on a 1099 form. If you paid interest on your mortgage, or real estate taxes, you will be mailed a 1098 with this information. You will need to send in an original of each of these forms when you file your taxes (they usually come in triplicate, with one copy for federal taxes, one for state taxes, and one copy for your records).

Make sure that you make a copy of each of these forms for your permanent records, in case you are ever audited or there is a question about your taxes.

It is important to report all income that you receive during the year, because the IRS also receives a copy of these documents. If your tax return does not show your true wages, you will be penalized.

Fill Out the Tax Forms

You can get a copy of most tax forms at your local library, post office, or by going online and downloading them. There will also be instructions with them.

You can fill the tax forms and mail them in, or the IRS now has an online site where you can file your taxes if you are a resident alien. If you are filing online, you will need to obtain a PIN number first by following instructions at the IRS site online. To obtain a PIN you will need to give your birth date, social security number, and information from your previous year's tax return.

The IRS will have designated efile companies and software that are needed for filing taxes online. Be aware that some of these are free and others aren't, so check out whether there is a fee when filing.

Getting Help with Filing Taxes

When you are filling out the forms, if you have questions or need help, the IRS has customer service representatives available by calling toll-free at 1-800-829-1040 from 7 a.m. to 10 p.m. EST. You can also call your local branch office for the IRS to talk to someone and get help. Professional tax preparation specialists can help as well, and if you own your own business, and will have complex taxes, you may want to consider hiring an accountant to help you.

Once you are done, double check that everything is accurate and legible before sending it in, then sign and date your form, and make a copy for your personal records. You can print out a hard copy of the online form if you file online (highly recommended).

If you owe money, you can write a check out to the United States Treasury, or pay with your credit card. If the IRS owes you money, you should include your bank account information, including your account number, when filing the form.

Payment or Refund

Once you have filled out your tax forms, you may or may not owe money. If you owe money, it is important to pay this before the deadline or else you will be charged interest.

You may be owed a refund if you overpaid your taxes.

You can choose to be paid by direct deposit by the IRS or by check. If you choose direct deposit, you will receive your refund in about two weeks if you file your taxes online; or payment within about one month if the check is mailed via postal mail.

Individual Versus Joint Returns

If you are single, you will automatically file an individual tax return. If you are married, and your spouse is not a nonresident alien, you may have the option of filing a joint tax return. Or, you may choose to file separately, though married, since you may receive some tax benefit by doing this.

Married couples can file a joint return if they are legally married and not legally separated by divorce or separate maintenance. If your spouse is a nonresident alien, you may be able to file a joint return if both spouses agree to be taxed on their worldwide income and can provide documentation of their tax liability to the IRS.

Some of the benefits of filing a joint return include:
  • A lower income tax rate bracket
  • Tax credits that include childcare credit, earned income credit, and others
  • Credit on interest earned on savings bonds that will be used for college expenses
  • Less of your social security benefits are considered taxable income
  • The ability to shelter larger amounts of preference income from being taxed
Both spouses must sign a joint return.

About Deductions

There are two types of tax deductions, standard deductions or itemized deductions. A standard deduction is a flat amount that the IRS allows people to deduct from their taxable income, and the amount will depend on your filing status. For instance, if you are over age 65, your standard deduction increases. The standard deduction is easier to figure out, but if you believe that you have a large number of deductions, then it can be worthwhile to itemize your deductions and fill out the long form of the 1040 instead of the "short form" 1040 EZ.

If you have children who are minors, and who are U.S. citizens or residents, then you can deduct each child as a deduction on your taxes (in 2001 the deduction was $600 per child under age 16). This is in addition to the exemptions that you take for dependents. You must note each child's social security number or its tax identification number (TIN) on the tax return. You can't receive more back than your total tax liability, so if with the children's deductions, if your tax liability is less than zero for that year, it will be counted as zero. And in some circumstances, you may also be able to receive a refund under the Additional Child Tax Credit.

Local and state income taxes are often deductible; you will need to check on whether you can deduct them on your return.

Keep receipts during the year for any expenses that are deductible for tax time. Just a few deductions you can count include:
  • Interest on your mortgage
  • Interest on student loans
  • Unusual and expensive medical expenses in the past year (if they exceed 7.5% of your yearly income)
  • Business expenses
  • Charitable giving
Originals of the 1099 forms and documentation of these deductions must be sent with your tax return.

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