In 2017, 143.3 million taxpayers in the United States paid $1.6 trillion in individual income taxes.
If you are new to U.S. taxation and are wondering how the process works and how to do your personal taxes, you might easily get overwhelmed.
Thankfully, we’re here to break it all down for you! Keep reading to find out all about filing taxes in the US tax system.
What Are the Tax Basics?
When you’re filing taxes, you’ll need to understand the basics, like what your tax return is and why you need to file it.
The three main terms you’ll have to know when it comes to taxes are filing, claims, and schedules.
Filing is just another word for sending your tax returns to the IRS. When you have a claim, it means that you qualify for something, and you’re taking the money back that they should owe you.
For example, you could claim a dependent. That means you have someone in your care that will earn you tax credits.
Lastly, a schedule is just a special kind of form. It has nothing to do with an actual calendar.
What is Taxable Income?
There are two main types of income that the U.S. tax system can tax you on: unearned income and earned income.
Unearned income normally includes things like interest, dividends, rents, gambling winnings, businesses, alimony, or stocks.
Earned income includes things like wages, tips, commissions, bonuses, unemployment benefits, sick pay, and your salary.
Who Has to File Taxes?
When you find out what income you have to file, you could technically file your taxes by yourself.
This is normally easier to do when you only have one source of income and you’re single. However, you’ll still need to use some websites to do your taxes.
Many people use things like TurboTax or HR Block to do them. However, the IRS also has an Interactive Tax Assistant Tool that will help you file them as well.
If you don’t feel comfortable doing your taxes by yourself, you can also always hire a CPA. They’re accountants who are familiar with filing taxes and will offer to do yours for free.
Some of them will have you come to the appointment and provide all your forms and paperwork. They may ask you questions in order to file them. However, some CPAs will just have you send them the paperwork and will file it on your own.
When Should You Start Filing Taxes?
Regardless of which method you choose, you’ll need to file your taxes by April 15th. Sometimes the IRS will extend the deadline, but in general, you’ll file all of your taxes for the last year by that date.
While some people do wait until the end of the deadline, you should file it as soon as you can. If you don’t, someone else may try to steal your identity and file it under your name. If this happens, it will become a very messy process.
Normally, you can start filing your taxes for the last year on January 1st. However, many businesses or banks may not send out the forms until later January and early February, so you may have to wait until then.
If you don’t have enough money to pay your tax return right then, you can always request an extension from the IRS as well.
If you can’t afford your taxes, you may want to consider hiring an attorney for tax relief.
What Tax Forms Do You Need?
While you’re waiting for your tax forms, you might be wondering what types of ones you’ll get.
Some of them will be mailed to you, but others will be provided online. Even if they’re provided online, make sure that you print out a copy of them so that you can have it handy.
One of the most common tax forms is a W-2. This is a form that your employer will send you, and it tells you how much money you earned for the past tax year.
It’ll also tell you how much of your income tax was withheld from your paychecks.
Most people who work part-time or full-time will get a form like this.
If you had a job but were a contractor or a freelancer, you’ll likely have this form.
You can put all kinds of income on this form, like from your rental real estate, your business, or other random jobs you were paid for.
When you have a 1099 form, you’ll also be able to claim anything that you purchased to help you do your job.
This includes things like a laptop, your gas, cell phone bill, or even the Internet.
If you have any type of loan, you’ll likely get this form. This can be for student loans or a mortgage.
It will tell you how much interest you’ve paid on the loans.
Depending on your earnings, you may even be able to deduct $2,500 of your student loan interest. This can help to lower how much you’ll owe in taxes for the year.
Learn More About U.S. Taxation
These are only a few things to know about U.S. taxation, but there are many more confusing aspects to keep in mind!
We know that figuring out how to file taxes can be stressful and overwhelming, but you don’t have to figure it out all on your own. We’re here to help you out!
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