The tax payment season is near and technically it is always better to plan out your taxes the early as possible which can give you benefits that will not only help you in paying your taxes on time but will provide benefits specifically with filing the tax in America. We will come to the benefits later in this article.
First, let us discuss some steps which will make the annual income tax filing process easier for individuals who are less experienced or are complete newbies to the taxation world.
The first and foremost step would be to calculate your income or “Know your income”…calculation can be named as the substep of knowing your income first. People generally don’t even know what their taxable income is and keep hanging in the dilemma of whether they are liable to pay the taxes or not. Income can be anything that a person is earning which is generally not only the job or freelance money but may also include the capital gains from the investments made or any other kind of inflow of money from any other sources.
When you are dome knowing your income the. The calculation becomes very easy and is just a few crunching of numbers away.
The second step when the calculation of the income gets done is to look for the solution to your dilemma of whether you are liable to pay any tax or not. Thankfully the federal government has made it easier than ever by edging out slabs for different income levels and you are only liable to pay tax when you reach or surpass a certain level of annual gross income from all the sources that you calculated. Remember you need to calculate and include all the income sources. To get the updated and latest slab information you can check the official federal sources website.
The third step which can make or break your process of annual income tax filing is the deadlines, it is always advisable to be ready and file your taxes as early as possible without waiting for the last date to submit your taxes. Keeping your documents ready can be crucial for this step and one should maintain the records of the income sources and any kind of donations or tax saving schemes for at least two years to save any hassle and help if any problem arises in the process.
The fourth step would be Gathering the papers and documents from all the workplaces you have worked with like the W-2 forms from each of the employers and the receipts of all the expenses if you are a self-employed person. For example, if you are a restaurant owner then you need to keep track of all the monthly or annual expenses to run your business which will come in handy while filing the taxes and claiming your deductions and credits if any. You can also keep receipts of the medical expenses you have faced in a year.
The fifth step is to keep track of all the laws and regulations from the internal revenue services website like for the covid situation you need to keep track of the economic impact payment or the unemployment benefits which will get reported on your filing and you can also check from the website if you are eligible for the particular payments, please keep in mind the EIP is not a taxable amount but, the unemployment benefits are taxable. All of these guidelines can be easily found on the IRS website. You can also directly contact IRS for any query you might have during your filing and reporting process. This is to note that if you are unable to pay your taxes all at once, you can also apply for a payment plan which will take away some of the burdens off your shoulders and can buy you more time. You can find all of these laws and regulations on the IRS website. Although, it is always advisable to pay your taxes on time to avoid any further charges.
These were some of the steps to make the Annual tax filing process easier for complete newbies and youngsters.
These are the general steps for annual income tax filing in America and can vary according to different individuals and situations so, it is always advisable to check and keep up with the IRS website and laws. Although, we try to keep the information as updated as possible by making amendments regularly but, still it is advisable to get in touch with your financial advisor or accountant before taking any income tax-related decision and always check the recent amendments and laws from the IRS portal.