Individual Income Tax
Individuals earning income in the United States pay a percentage of their earnings to the Internal Revenue Service (IRS) in the form of individual income taxes. The amount due is calculated according to the amount earned. The tax is levied on salaries, wages, interest, dividends, investments, and other income earned throughout the year. The District of Columbia and 41 States also collect individual income tax. These taxes pay for public services performed by the government, such as the building and maintaining of infrastructure, defense of the country and the provision of assistance programs.
Some individuals do not have to pay taxes (rules for 2020):
All individuals must file a federal income tax return to receive any refunds of any federal income tax withheld from their paychecks. Individuals qualifying for the following credits may also receive a refund:
Tax payers must file their individual income tax return by April 15, 2021. If they do not, they will incur interest and penalties in addition to the taxes already owed, if any. Tax payers can request an extension; however, paying federal and state income taxes on time will prevent additional amounts, such as interest on the amount owed. Tax payers living outside of the United States must also pay taxes as well as some resident aliens living here in the United States.
For tax payers working as self-employed, there are additional deductions that may be claimed but also additional rules that must be followed. For example, a self-employed tax payer can claim a tax deduction for the portion of their home that they use for their business, but not for their entire home. Additionally, a self-employed individual or an individual working for a company can claim a deduction for meals and travel, but ONLY if the meal and travel was related to the work. Tax experts can determine what expenses can qualify as deductions. Claiming deductions that are not allowed can trigger an audit or add to your tax amount owed.
Tax experts can assist individuals in determining tax filing options. They can also determine whether couples should file as individuals or as a couple. The rules for income tax returns can be very complicated. A mistake or misstep can be very costly and involve endless time in “correcting” the mistake.
Tax experts are also very knowledgeable in navigating the complex rules regarding the filing of individual income tax returns. They can find the best deductions for each individual’s situation and help save them time and money and perhaps even get a bigger tax refund. Marking the wrong boxes, forgetting to report certain income, transposing numbers or making a simple subtraction or addition error can trigger an audit. This will involve even more time and money to resolve.
In response to the COVID-19 pandemic, the federal government has issued refunds to individuals who have filed their federal income taxes. However, if an individual has not filed a tax return, they will not receive a refund unless they do file an individual tax return. The tax return may indicate a zero payment of taxes due; however, the IRS recognizes the individual as qualifying for a refund since the tax payer has filed a tax return.
Before consulting a tax expert, gather all documents, including receipts, regarding your income and deductions. Be prepared to answer any questions that the tax expert may have regarding any of the documents. Call us today so we can help you file an accurate and complete individual tax return. Visit our tax resolution page for more services.