About Filing Your Taxes
When the tax season approaches, you often find yourself wondering about the options of filing income tax returns correctly. Tax season starts in January and ends on the 15th of April every year. However, filing your federal income tax returns in Akron need not be overwhelming. By partnering with the right tax preparer, you can avoid costly mistakes and take advantage of opportunities that can help you save money and increase your federal tax refund.
Basically, a tax return is a form or forms filed with a tax authority, such as the IRS in the USA. The form contains information about income, expenses, and other tax information. Taxpayers can calculate their tax liability and request a refund if they have overpaid their taxes. It can also allow taxpayers to schedule their tax payments since they must file their tax returns every year.
There are three major sections to tax returns- income, deductions, and tax credits.
You have to list all your sources of income in the income section of a tax return. In the US, the W-2 Form is typically used for reporting all the income you have earned. Your income includes your wages, income from being self-employed, dividends, royalties, and more.
Ideally, you should receive your W-2 Form by January or February every year. People who work full-time usually receive the W-2 form with details of all their earnings and the taxes withheld. For freelancers and contractual workers, the equivalent is the Form 1099-NEC, which offers details of all they have earned. If you have earned dividends or interest on investments, you may receive other documents, such as 1099-DIV and 1099-INT.
College students may receive the 1098-T that shows the amount they have paid in tuition. If they have received any grants or fellowships, that will also reflect on the form.
A tax deduction is a claim or deduction that lowers your taxable income and, therefore, your tax liability. Your tax deductions could be different depending on the jurisdiction you live in. However, some common examples of tax deductions include interest deductions on certain loans, contributions to retirement savings plans, and more.
Understanding the kind of deductions, you are eligible for can help you gather the right documentation.
Here are a few deductions on your income tax returns Akron that you may be eligible for:
3. Student Loan Interest
You may be able to claim tax deductions up to $2500, depending on your adjusted, modified gross income. Student loans can affect your refund status and give you a chance for a maximum refund.
4. Business Expenses
If you work as a freelancer or are self-employed, you may be able to claim deductions for work-related expenses. Business tax returns require additional forms to report income and expenses. Expenses would include office supplies, industry subscriptions, and more. Tracking your revenue and using the correct forms to report your individual income revenue will reduce the error rate on your federal tax return. Federal tax status changes for the self-employed as additional expenses are available on schedule C forms.
5. Education Credits
Are you a full-time student? Are you being claimed as a dependent? If you answered no, you may be eligible for a tax credit. However, you are only eligible if you contribute to a retirement plan. The amount of credit you are eligible for depends on your adjusted gross income and your filing status.
For instance, for the 2021 tax year, you may be eligible for saver’s credit if your adjusted gross income is $33,000 or less and your filing status is single. Similarly, you may be eligible if your adjusted gross income is $66,000 or less if you are married. These numbers are subject to change, so you may want to check the IRS website.
The IRS website also lists other deductions that you may be eligible for.
7. Tax Credits
A tax credit refers to the amount of money that taxpayers can deduct from the income taxes that they owe. Like deductions, even tax credits can vary between jurisdictions. However, you might be able to claim credits attributed to the care of seniors and children, education, pension, and many more.
After reporting income, deductions, and credit, the end of your income tax return identifies the amount you owe in taxes. It will also show if you have overpaid your taxes. If you have overpaid on your federal return, you qualify to get a refund in the mail or if you e filed you can roll them over to the next year.
The next step is to file your income tax return. If you feel confident enough, you can always file it yourself. There is tax preparation software available online that you could use to file your returns for a fee. However, can you be sure of their accuracy? If you want accuracy, reliability, and safety, the ideal is to hire a professional preparer to file your federal return. Plus, you also get expert guidance, which is a win-win.