Tax filing season is back. The last date for filing your tax returns is April 18, 2017, and in the case of failure or delay, you are liable to a penalty.
Filing tax returns is a complicated process where one needs to calculate salary, business income, capital gains, dividends, interests, IRA and pension distributions, farm income, unemployment income, Social Security benefits, taxable state and local tax refunds, and so on. If you are a Blue collar worker, then include your tips, and if you are a woman receiving alimony, add that along with your other earnings.
It helps to have information about payment schedules for the year 2017 and on filing tax into four payment splits, one for each quarter listed below:
- January through March, due April 15.
- April through May, due June 15.
- June through August, due on Sept. 15.
- September through December, due on Jan. 15, 2018.
How to File Tax?
Our next discussion is on filing a return. Use the following tax forms:
- Form 1040A (U.S. Individual IT Return)
- Form 1040 (U.S. Individual IT Return)
- Form 1040EZ (IT Return for Single and Joint Filers sans Dependents)
- Form 1040NR-EZ (U.S. IT Return for Certain Nonresident Aliens without Dependents)
- Form 1040NR (U.S. Nonresident Alien IT Return)
How much income is taxable? Figuring out due amount from your taxable income by referencing tax tables is a tedious task. If you are a first time user, you need to use tax tables to calculate the income tax you need to pay by subtracting qualifying deductions from your gross income. IRS Form 1040 is used to file IT returns. IRS Form 1040-EZ tax tables show the tax brackets and amounts payable for federal taxpayers filing the 1040-EZ form.
Your adjusted gross income (AGI) is calculated from your gross income to determine the actual taxable income. AGI calculation is important as it impacts many deductions. Unreimbursed business expenses, medical costs, alimony, student loan interests, defined contributions (DC), loss from sale or exchange of property are examples of deductions.
Ways to save Personal and Corporate Tax
Understanding on how to save on personal and corporate tax is critical. The following tips help businesses and individuals save some dollars:
- You can improve tax situation on ‘benefits to ‘Such benefits include credit for child care costs and child tax credit worth up to $1,000 for children under 17.
- Putting money into college savings is an ideal option.
- As mortgage interest payments are tax deductible, entrepreneurs keep their mortgage for extended periods of time.
- Invest in retirement accounts, including 401(k)s and IRAs, they are tax deductible, within limits.
- Expenses like acupuncture, supplies like bandages, and breast pumps are health related, therefore deductible.
- The more energy efficient, the more points you get for deductions. So, make changes like installing insulation, new windows or doors, and qualified heating and cooling systems at your home.
Self-employment Tax Benefits
If you are working for an employer, 7.65% of your gross paycheck is withheld to pay for Social Security and Medicare, as a tax to the Federal government, by your employer. On the contrary, when you own and run a business, no one does it for you. Therefore, you are paying both portions of your social security and Medicare, which adds to15.3% (of your net earnings) over and above your regular Federal income tax.
However, there is a solution to avoid the double pay.Often businesses begin as a sole proprietorship or general partnership and then evolve into an LLC or S Corporation. If you are running an S Corporation or an LLC taxed as an S Corporation, it is wise to split all profits into two separate payment types – salary and S Corp distributions. In this case, you pay social security or Medicare tax only on your salary portion and reduce self-employment taxes.
In case you are an entrepreneur or a self-employed, you need to know all tax deduction benefits at your disposal. Hire a good accountant to take all available legal tax benefits.
Tax Advice for College Graduates
In case, if you are paying a student loan, you can claim a deduction for the interest you pay. Claim the student loan tax deduction till you fully repay your student loan. Qualify yourself for the current tax year’s income limits with this.
Student loan tax deductions and credits amount to a retroactive scholarship for your education. Take advantage of all the deductions and credits you qualify.
Grad students can claim credits over and over again. Use it while taking a course or pursuing a Ph.D. You can avail it up to $2,000 per tax year.
Caution, the first job search post-college tend to be expensive and are not deductible. However, do not worry about it as your subsequent job searches in the same line of work are deductible.
Advantages of using Tax software for e-file
Apparently, people find it difficult to file tax. Making all calculations and including all minute details are burdensome and many worsen it by getting to the particulars in the eleventh hour leading to complications and panic. That is why exactly people tend to use applications to do IT calculation and filing. E-filing is safer than manual filing as e-filing helps save up to $100 over going to a tax store.
According to a gobankingrates.com report, 43% of Americans are comfortable with filing taxes from their homes. Among them, 34.5% used tax filing software, pointing to a growing league of people who understand the benefits of reduced complication and ease of using tax filing software.
If you are in search of personal tax preparation options, try H&R Block Deluxe, an expert at analyzing tax topics for homeowners with W-2 incomes, dividend and investment incomes, and itemized deductions. Another competitive product is Intuit TurboTax Deluxe which comes with an excellent and easy to use interface for mobiles too.
Tax collectors/Estimators Tools
Embrace simplicity; now things are getting simplified thanks to tax filing applications. Businesses or individuals who have made up their mind for e-filing of tax can consider reputed taxing software. TurboTax is one such tax software for small businesses because it has robust features for extremely thorough and accurate tax-filing process. Reviews featured in PC Magazine say Turbo Tax software is easy to learn and use. Business owners intending to make short work of tax season without cutting corners or employing a professional can use it as it comes with all core features like free Federal and State filing options for 1040EZ and 1040A filers.
Using a tax prep program eases tax filing process. Even if you have no experience with paying taxes, you can follow simple steps to pay your tax online. Beyond the general user manual, these vendors provide 24/7 solution support. Use them and make your life easier.