You will have to file a tax return using Form 1040 (or one of its variants, such as 1040EZ or 1040-NR) unless you are a dependent or you did not make any money during the year.
For the previous year's tax return, most people require filing by April 15. By means of your job and other financial institutions, you start getting reports on your income in January.
You must first determine which filing status applies to you, since your tax rate and standard deduction rely on your filing status.
There are five filing statuses:
Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er). Your status is determined as of the last day of the year.
Given below is overview of the forms that report your income.
W-2 forms
For the year, W2 tax form is a form that your employer is required to provide-they report your income and the amount in taxes you have already paid. You will have one form for each employer if you have worked for more than one employer during the year.
Companies, mutual funds, banks and other financial institutions where there is presence of your investments (or even a savings account) are required to report your income from any financial transactions. The forms they use are as follows.
Form 1099
The following the types of 1099 tax forms
- Form 1099-DIV reports dividends you received during the year (mutual funds, brokers, and companies where you have invested will send these to you by the end of January).
- Form 1099-G reports government payments to you, including state tax refunds and unemployment compensation.
- Form 1099-MISC reports royalty income, rental income, and self-employment income.
- Form 1099-R reports distributions from IRAs and other retirement plans.
- Form 1099-SSA reports social security income you received for the year.
All of the income reported on the above forms will be reported on the schedules that complete your Form 1040. Your adjusted gross income (AGI) will be the number at the bottom of the first page of the 1040 form.
By taking gross income minus any adjustments for example contributions to IRAs, alimony payments, etc, AGI is calculated.
The AGI will determine your eligibility for any tax breaks. It is important to maximize all deductions because the AGI minus all exemptions and deductions will determine your taxable income .
You need to itemize (using Schedule A) if you list each deductible item and the amount exceeds the standard deduction.
Form W-4
For your employer, form W-4 allows you to indicate a withholding allowance. On the form, each exemption merits a maintenance allowance; however, they do not have to match. Exemptions can be made for yourself, your spouse if filing jointly, and any qualifying dependents.
The most common tax deductions are:
- Mortgage interest (reported on Form 1098)
- Real estate taxes
- Medical and dental bills
- Donations to charity, and
- Investment expenses such as maintenance fees for IRA accounts (reported on Schedule A).
You can ask for an extension by filing Form 4868 if April 15th is here and you are not ready to file your return. This will give were given a usual four-month extension.
An automatic two-month extension is given to you if you are living outside of the country (U.S. and Puerto Rico). You will receive a broad extension if you are serving in the U.S. armed forces to file and pay while you are in service.
Based on the amount shown as due on the return, failure to file an extension will result in 9% annual interest and half percent penalty per month. You will have to pay a late filing penalty of 5% per month to a maximum of 25% if you do not file an extension.
For an adult, your return is eligible for three years, so for no less than that amount of time, you must maintain your federal tax papers and stock confirmation receipts and records of other securities purchases.
You should keep forever other important documents, like those related to your home purchase.
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