Dealing with Your Income Tax
In general, not many people are giving the time to think about their taxes; not until the tax season comes. 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.
The preparation for an income tax return is one humongous job and this is something that demands time. 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.
The dental and medical expenses, charitable contributions, interest on home mortgages, local and state taxes as well as casualty losses are only some of the good examples for itemized deductions.
You’ll soon arrive at the figure of your taxable income after you have subtracted personal exemptions. If for example that your taxable income is greater than a hundred thousand dollars, then you have 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. Six tax brackets are applied which are the ten, fifteen, twenty-five, twenty-eight, thirty-three, and thirty-five percent. The tax bracket which you fit in will largely depend on your marital status and your income.
As a matter of fact, in the US, the tax returns are basically forms that are filed with the IRS or the Internal Revenue Service either done through the state or with local tax collection agency where such organization has people who can properly and accurately calculate the income tax or whatever tax 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. 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.