Income Taxes

How to Prepare for Annual Income Taxes

Our income taxes pay for many of the government services we receive. It seems like a big chunk of our paycheck each week, but it's a pay-as-we-go method of covering our tax responsibility for the year, so we don't owe it all at once when April 15 rolls around. You can have some input into how much is withheld by willing out a W-4. Your employer uses this form to determine how much is withheld from each check.

The ideal situation is to not owe very much in taxes, nor to get a very big tax return after calculating your taxes. By completing a W-4 worksheet, you can estimate what the amount of taxes that will be due. You can have extra withheld from each check, or claim fewer dependents so less is withheld.

When the beginning of each new year comes around, everyone knows it tax time. April 15 is the official deadline for filing income taxes, although you can file earlier. Anyone who had income for the year needs to file a tax return, as long as the amount is over a preset minimum. This minimum amount varies depending on your filing status, so if you aren't sure, check the IRS guidelines to see where you fall. It may be to your benefit to file anyway, since it's the only way you can get any refund that may be owed to you.

Income taxes are only assessed on part of your income. Not everything is taxable. The IRS defines taxable income as the gross income minus all exemptions and deductions. Gross income includes earned income, or wages from your job, and unearned income, including interest income, profits from a rental house or an asset you sold, or a business.

The goal of completing income tax forms is to get the amount of taxable income down as low as legitimately possible. Once you take all allowable adjustments, you then arrive at your adjusted gross income. You can either take the standard deduction, or itemize your deductions to determine your taxable income. This final amount is what you actually pay income taxes on.

You are responsible for completing and mailing your income taxes by the official deadline, April 15. If you need more time, you can file Form 4868 to request an extension, which will give you until August 15 to complete the required tax forms.

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