How To Do Individual Taxes The Right Way

Do you dread tax season? Taxes are a source of frustration for many people. Whether you’re struggling to figure out how to file or are dealing with an audit, taxes…

Tax

September 23, 2022

Written by John Wonneberger

Do you dread tax season? Taxes are a source of frustration for many people. Whether you’re struggling to figure out how to file or are dealing with an audit, taxes can be a major headache. If you’re overwhelmed by the amount of paperwork, know you’re not alone. You can easily navigate this process with the right tax preparation and planning.

 

This blog post will provide an overview of the most important things to remember when filing your taxes as an individual. We’ll also discuss some common tax breaks and deductions available to you. With just a little preparation, you can make this time less stressful and ensure that you take advantage of all the tax benefits.

What Are Individual Taxes?

Individual taxes are the taxes that are levied on a person’s income and assets. This can include income from employment, investments, gifts, and inheritances. Progressive taxes mean that the more income a person earns, the higher their tax rate will be. 

 

Individual taxes fund many public expenditures, such as healthcare, education, and infrastructure. For many people, paying individual taxes is an important way to contribute to society. However, high tax rates can also be a burden on taxpayers and may discourage work and investment. With tax preparation and planning, you can find a way to get enough revenue and ensure the tax burden is not too high.

How To Determine If You Need To Do Individual Taxes?

Preparing and filing taxes can be even more daunting for those who are self-employed or have multiple income sources. Fortunately, there are a few key things to look for that can help you determine whether or not you need to file individual taxes.

 

  • 1099 forms: If you received any 1099 forms from employers or clients, you’d need to file an individual tax return. 1099 forms report income not subject to withholding, such as interest, dividends, or self-employment income.
  • Job change: If you didn’t receive any 1099 forms, but your job situation has changed in the past year (e.g., you started working for yourself or switched jobs), then it’s still a good idea to check with the IRS to see if you need to file an individual return.
  • Life events: Consider whether or not you had any major life changes in the past year. Did you get married? Had a baby? Moved to a new state? These and other significant life events can impact your tax status and may require you to file an individual return.
  • Self-employment: If you’re self-employed, you need to file your taxes as an individual. This is because businesses are taxed differently than individuals, and you don’t want to end up paying more tax than you owe.
  • Properties for rent: If you have any income from rental properties, you’ll need to file your taxes as an individual because rental income is considered personal income, not business income.
  • Investments: If you have investment income, you may need to file your taxes as an individual because investment income is taxed at a different rate than earned income (such as wages from a job).

 

Ultimately, the best way to know if you need to file individual taxes is to consult with a tax professional. They can help you understand your specific situation.

Tax Preparation

What Is Tax Preparation?

Tax preparation is preparing tax returns, usually annual, state, and federal, following the tax laws. Individuals can prepare their taxes using special software that guides them through the process.

 

Software programs will ask questions related to income and expenses and then calculate how much is owed or refunded to the taxpayer. Professional tax preparers also offer their services to help taxpayers file their returns. This can be done in person at a tax office or electronically.

How Does It Work?

Filing taxes can be confusing and time-consuming, but no one wants to owe money to the government. However, you can do a few things to make tax preparation a little easier. 

 

  1. Ensure you have all your documents in order: This includes W-2 forms from your employer, 1099 forms for any freelance work, and records of any deductions or credits you’re claiming.
  2. Decide which filing status best applies to your situation: There are five options: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child.
  3. Start filling out the tax return: Once you’ve determined your filing status, you can begin to fill out your tax return. If you’re unsure how to answer any of the questions, several online resources can help.
  4. Check proof for any mistakes: Double check your return for errors before you submit it. Preparing ahead of time can make tax season a little less stressful.

How Is It Beneficial?

Few people enjoy the process of tax preparation, but there are some benefits to be had.

  • Get a refund. If you’re due a refund, the sooner you file your taxes, the sooner you’ll receive it.
  • Avoid penalties and interest charges. If you owe money to the government, the sooner you file your return, the longer you will have to pay off your debt.
  • Plan for the future. By understanding how much money you owe in taxes, you can make better financial decisions in the future.
  • Be prepared. Avoid the last-minute rush and minimize the risk of making errors. By getting a jump on tax season, taxpayers can save themselves time, money, and anxiety.

 

Although it may not be fun, tax preparation can be a helpful tool for managing your finances.

Tax Planning

What Is Tax Planning?

Tax planning is the process of structuring one’s financial affairs to minimize tax liability. It involves strategically timing income and deductions, using tax-advantaged accounts, and taking advantage of available tax credits and deductions.

 

Tax planning can be complex, and there are a variety of strategies that can be employed. However, even basic tax planning can significantly affect the amount of taxes owed.

How Does It Work?

Unless you’re a tax evader or want the IRS breathing down your neck, you must pay your taxes on time and in full. However, there are ways to minimize the amount of taxes you owe.

 

Tax planning can be done by making use of tax laws and regulations that allow for certain types of transactions to be conducted in a tax-advantaged manner, such as tax deductions and credits, as well as using tax-advantaged accounts such as 401(k)s and IRAs.

How Is It Beneficial?

Tax planning is an essential part of financial planning. Yet, it’s often overlooked or put off until the last minute. The benefits of tax planning are significant:

  • Save money
  • Minimize your tax liability
  • Make the most of your hard-earned income
  • Lower tax bill
  • Avoid penalties and interest charges

Types of Tax Planning

There are a number of strategies that can be used to reduce your taxes, and the best approach will vary depending on your individual circumstances.

 

  • Tax-advantaged accounts: Investing in a tax-advantaged account such as an IRA or 401(k).
  • Income shifting: Moving income from a high-tax bracket to a lower-tax bracket. For example, suppose you are in the highest tax bracket. In that case, you may consider investing in a business that generates income in a lower tax bracket.
  • Deduction planning: Take advantage of all the deductions and credits that you are eligible for. Deduction planning can help you reduce your taxable income and, as a result, save money on your taxes.
  • Tax-loss harvesting: Deliberately selling investments at a loss to offset capital gains.

 

Who Can Help You With Your Tax Planning?

Tax return preparation can be daunting, especially if you are unfamiliar with the process or have complex financial affairs. Fortunately, there are professionals who can help you navigate the tax system and maximize your refund. Here are some of the different types of tax return pros:

 

  • Certified public accountants: CPAs are licensed accountants who have passed a rigorous exam and met all other requirements set by their state. CPAs can provide a full range of tax services, from preparing and filing your return to representing you in an audit.
  • Enrolled agents: EAs are tax professionals who have passed a comprehensive three-part exam administered by the IRS. EAs can represent taxpayers before the IRS in all administrative proceedings, including audits, collection, and appeals.
  • Lawyers: They’re licensed by the state and have a degree that backs up their tax code and law understanding.
  • Preparer Tax Identification Number: PTINs are responsible for preparing and filing tax returns for individuals and businesses. They must complete a competency exam and undergo a background check before becoming licensed to practice. In addition, PTIN holders must complete continuing education courses to maintain their license.

Get A Qualified Company To Handle Your Taxes Properly

As anyone who has gone through the tax preparation process knows it can be a draining task. There are endless forms to complete and documents to gather. It’s no wonder many people put off doing their taxes until the last minute. But tax time doesn’t have to be a headache.

 

Nesso tax offers a complete and reliable tax service that can minimize the stress of tax season. Our experienced tax professionals will work with you to ensure that all your tax requirements are met. We’ll also help you with tax planning, so you get as much as possible out of your tax return. Contact Nesso Group today!

 

GET IN TOUCH WITH US

Subscribe To Our Blog

Suscribe

Read More Entries

Let’s Talk About
What’s Important To You

Nesso
Solutions

Our approach to integrated solutions and comprehensive services alleviates stress and elevates success. We provide guidance across multi-dimensional areas of expertise for individuals and businesses. You can trust that we’re working together with your best interest in mind.

Image Item

Nesso
Tax

Image Item

Nesso
Accounting

Image Item

Nesso
Wealth

Image Item

Nesso
Insurance

Image Item

Nesso
Medicare

Image Item

Nesso
Benefits

Call Now Button