Importance of Filing Income Tax
Generally, not most people thought about their taxes; well except when the year tax season comes around. For so many Americans, this is one of the most important days in the year and also, the most stressful that they mark it along with other special events in their lives. On the other hand, let us also face the fact that there is no enjoyment in having to meet the deadline for the filing of tax returns.
In reality, the preparation for the filing of income tax return is quite perplexing and thus, requires your time and patience. Despite the fact that this job is cumbersome and tiring, we can’t neglect the fact that it is something that should be done carefully.
When you are in the process of calculating individual tax, you need to start it by means of evaluating your gross income which include your interest income, work income, annuities, and pension and then subtract any adjustments similar to tax on self-employment, educational loan interest paid, alimony, retirement plans, adjusted gross income or AGI and interest penalty on the early withdrawal of savings. Once you have calculated the AGI, you have two options to take and one is to subtract the itemized deductions or the standard deductions; basically whichever is greater.
Few examples of the itemized deductions may include a couple of dental and medical expenses, charitable contributions, interest on home mortgages, local and state taxes as well as casualty losses.
You’ll soon arrive at the figure of your taxable income after you have subtracted personal exemptions. You would have to pay a visit to the IRS tax rate schedules in the event that your taxable income is more than 100,000 dollars. And with such, things might be more complex because here, the marginal tax rate system will be used. Six tax brackets are applied which are the ten, fifteen, twenty-five, twenty-eight, thirty-three, and thirty-five percent. As a matter of fact, your marital status and your income will dictate which tax bracket you fall to.
In the US, tax returns are normally forms filed with IRS or the Internal Revenue Service either done through the state or with local tax collection agency to which they have the info on how to accurately calculate income tax or other taxes for that matter. The form 1040 is standard US individual tax return form and there are other variations of the form available too such as 1040EZ and 1040A. And just a quick fact about taxes; it doesn’t matter if the tax came from legal or illegal business, so long as it is taxable, except that you have to pay your taxes.