For most people, filing their tax returns is something they’d rather avoid. However, it’s essential to understand the basics of this process to ensure that you’re doing everything correctly. This year, why not make things a little easier on yourself by learning about your tax return?
This blog post will provide a comprehensive guide to tax returns, including information on what you need to file and how to file them. We’ll also discuss some common mistakes people make when filing their taxes. Whether you’re starting a new business or an individual taxpayer, this guide will help you navigate the process of filing your tax return.
What Is A Tax Return?
A tax return is a form taxpayers file with the IRS detailing relevant information to calculate how much money the taxpayer owes in taxes. The IRS uses the tax return to determine whether the taxpayer has paid the correct amount. They’re also used for refunds. If a taxpayer has overpaid their taxes, they will receive a refund from the IRS.
As mentioned, you need to provide plenty of information for the IRS to know if you’re accurately taxed. This includes:
- Personal data, such as your name, address, and Social Security number.
- Data about your income, including any wages, interest, or dividends earned over the year.
- Data about any deductions or credits that you’re claiming. For example, deductions for things like mortgage interest or charitable donations.
Who Needs To File A Tax Return?
In general, you need to file a tax return if your income is above a certain threshold. In 2022, this threshold is $12,550 for single taxpayers. For married taxpayers filing jointly, the threshold is $25,100. However, there are other circumstances in which you may need to file a tax return even if your income is below these thresholds.
For example, if you’re self-employed or have investment income, you’ll need to file a tax return regardless of how much money you’ve earned. Additionally, if you’re claiming certain deductions or credits (like the Earned Income Tax Credit), you’ll need to file a tax return to receive them.
Steps For Filing A Tax Return
The first step in filing your tax return is to gather all of the necessary documents. This includes your W-two form from your employer, any forms related to interest or dividends earned, and any receipts for expenses that you plan to deduct. Once you have all of these documents, you’ll need to fill out your tax return form. You can get this form from the IRS website or request it from their office.
Once you have your form, you’ll need to enter all of the required information previously discussed. You can also file an extension if you need more time to prepare your tax return. However, this doesn’t extend the deadline for paying any taxes owed. Once you have everything filled out, you can submit your tax return electronically or by mail.
When submitting your tax return electronically, you’ll need to provide your bank account information so that the IRS can directly deposit your refund (if you’re owed one). If you’re mailing in your tax return, you’ll need to include a check or money order for the amount of taxes you owe.
Common Mistakes People Make When Filing Their Taxes
Now that we’ve covered the basics of filing your tax return, let’s look at some common mistakes people make.
- Not including all of the required information on your tax return form. This can delay processing your return or even a rejection of your return. Yet, it’s one of the most common mistakes people make.
- Claiming deductions or credits that you’re not eligible for. Be sure to read the instructions carefully before claiming any deductions or credits. Otherwise, you may end up having to pay a penalty.
- Not filing your tax return on time. The deadline for filing your tax return is April 18, 2022. You may be subject to late fees and penalties if you don’t file by this date. You should set aside enough time to complete your tax return and submit it before the deadline.
- Not paying the taxes you owe. Be sure to include a check or money order for the amount of taxes you owe when you file your return. The IRS will charge you interest and penalties on the unpaid amount if you don’t.
The Consequences Of Not Filing A Tax Return Or Filing It Late
If you don’t file your tax return or file it late, you may be subject to several penalties:
- The most common penalty is the Failure To File penalty. This is a penalty for not filing your tax return on time. The penalty amount is 5% of the taxes you owe for each month (or part of a month) that your return is late, up to 25%.
- If you don’t pay the taxes you owe by the due date, you will be subject to a Failure To Pay penalty. This penalty is 0.50% of your unpaid taxes for each month (or part of a month) that the taxes aren’t paid. The penalty can’t exceed 25% of your due taxes.
- When your return is over 60 days late, the minimum Failure to File penalty is $435 or 100% of the tax required shown on the return, whichever is less. Keep in mind that the IRS also charges interest on any unpaid taxes.
If you’re facing financial difficulty and can’t pay your taxes, there are options available to help you. You can set up a payment plan with the IRS or apply for an offer in compromise. These options can help you avoid some of the penalties associated with not being able to pay your taxes.
No matter what, it’s always better to file your tax return late than not at all. Even if you can’t pay the taxes you owe, filing your return and making arrangements with the IRS can help you minimize the penalties and interest charges you’ll face.
Get Help Filing Your Taxes
Many resources can help when you’re having trouble preparing your tax return. The IRS website provides a lot of helpful information, including tax forms and instructions. You can also visit your local IRS office or call their customer service line for assistance.
Additionally, many tax preparers can help you file your taxes. Working with a tax preparer can be an excellent option for anyone who lacks the time or expertise to prepare their return, especially if you’re self-employed or have complex financial situations. They can also help you take advantage of deductions and credits that you may not know.
Tax Returns in Personal Tax
Personal tax returns are the most common type of tax return. They’re used to report an individual’s income and calculate the taxes they owe. Before filing it, you need to gather all necessary documentation, including W-2 forms from your employer, 1099 forms for any freelance work, and receipts for any deductions that you plan to claim. Your tax return will also include information about any dependents, such as your spouse or children.
Tax Returns in Business Tax
If you’re self-employed or have a business of any size, you’ll need to file a business tax return. This type of return is used to report the income and expenses of your business. The IRS uses this information to determine how much tax your business owes. Business tax returns are also useful for reporting other information about your business, such as the number of employees you have, the type of business you operate, and your business location.
Tax Returns in Estate & Trusts
An estate tax return is required when the value of an individual’s estate exceeds the exemption amount. The estate tax is a tax on property transferred from a deceased person to their heirs.
The current exemption amount is $11.7 million. This means that no estate tax will be owed if the value of an individual’s estate is less than this amount. If the value of an estate exceeds the exemption amount, the estate will owe taxes on the excess amount. The top tax rate for estates is 40%.
On the other hand, a trust is a legal arrangement in which one person (the trustee) holds property for the benefit of another person (the beneficiary). Trusts can be created during a person’s lifetime or after their death. If you’re the trustee, you may need to file a tax return for the trust. For the 2022 tax year, a simple or complex trust’s income is taxed at 10%, 24%, 35%, and 37% bracket rates, with earnings above $13,050 subject to the 37% rate.
Nesso Tax – Get Comprehensive Tax Services in Connecticut
At Nesso Tax, we understand the importance of filing your tax return on time. We also know that it can be a complex and confusing process. That’s why we offer comprehensive tax services to help you file your return and avoid any penalties.
Our specialists are highly qualified and skilled in all parts of tax law, so you can have relief knowing you’re getting sound advice tailored to your specific circumstances. We’ll work with you to design a tax plan that minimizes your tax liability. We’re also part of the Nesso Group, which aims to help people and businesses succeed through guidance in several areas, including accounting, wealth, law, and more.