Dealing with Your Income Tax
Generally, not most people thought about their taxes; well except when the year tax season comes around. For many Americans, it is no doubt the most stressful time of their year and a lot of people mark their calendars along with the special events of 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. Well, it is true that this is a cumbersome job and not to mention, it is tiring too but, this is one thing that you cannot leave without.
As for the calculation of your individual tax, the one thing where you have to start it is by assessing your gross income which normally includes 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. As soon as you’ve calculated the AGI, you are given with a couple of options 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.
After subtracting personal exemptions, you are going to reach a ballpark figure of taxable income you have. If the taxable income is greater than a hundred thousand dollars perhaps, then you need to visit the IRS tax rate schedules. And with such, things might be more complex because here, the marginal tax rate system will be used. In here, there are six brackets of percentage applied and they’re ten, fifteen, twenty-five, twenty-eight, thirty-three, and thirty-five percent. Tax bracket to which you’ll fit in will be based as per your marital status and your income.
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 several other variations of the form are available similar to the 1040EZ and 1040A. Another interesting fact about taxes is that, no matter where it came from, whether legitimate or illegitimate business, it will be taxed.