Filing your income tax is a part of life. If you live in the United States, it’s something you have to do. Even if you don’t make enough money to owe any tax, you may still have to file a return. After all, the IRS might owe you money! And if you’re a solopreneur or own a business, filing your taxes can be even more complicated. This guide will walk you through the tax filing process by answering some key questions.
Does Everyone Have to File Their Tax Return?
No. Whether or not you need to file your return depends on your filing status, income level, and if anyone has claimed you as a dependent. If you don’t meet the minimum income threshold and are not legally required to file your taxes, you may still want to because you could be eligible for refundable tax credits.
What Forms Do You Need to Have on Hand to File Your Tax Returns?
If you’re looking to file your taxes, you’ll need to have your W-2, 1099, 1099-INT, 1098, and 1095-A with you. You may also be sent other documents by employers you’ve worked for. Gather all these documents to make the tax filing process easier for yourself.
What Are Tax Credits and Deductions?
When you submit your forms to claim your tax return, it’s important that you also claim all the credits and deductions that you are entitled to. Deductions and credits are instrumental in helping you save on taxes. A deduction essentially refers to the amount of your income that is deemed taxable by the government. For instance, if you have an income of $40,000 and you claim deductions worth $2,000, your total taxable income reduces to $38,000. In comparison, a credit lowers the taxes you owe on a dollar-for-dollar basis. This means a $2,000 credit will lower your tax bill by $2,000.
How Should You File Your Tax Return?
You can choose to e-file your forms. If you’re not comfortable with the digital approach, you can mail in your forms as well. You can also hire authorized tax preparers to e-file on your behalf.
