The Ins and Outs of an Individual Tax Return
Everyone has filed an individual tax return at some point in our lives, and most of us have to do it every year. Tax returns are sent in order to report a person’s income for the year, and it’s used to calculate the amount of tax he or she owes on that income. Everyone is required to fill one out if their income is greater than a certain amount – also called the “statuatory minimum.” They can be mailed to the IRS, or they can be dropped off at a local tax office. Tax returns can also be filed electronically through certain programs like TurboTax.
The IRS uses two standard forms for filing individual tax return:
- Form 1040 – This form is used for more complex tax returns. If someone has a lot of business-related expenses that can be claimed as deductions, or if they have children they can claim as a dependent, they would need to use this form.
- Form 1040EZ – This is the shorter version of the Form 1040, except that it doesn’t have all the complex questions that might not be necessary for certain individuals.
Be sure to choose an appropriate form for your particular situation.
How Employers Report Employee Income
Federal Law requires a company to report the annual income of every employee to the IRS, even people they use as independent contractors. But how that income gets reported depends on whether that person is actually employed by the company or if he or she is used on a contractual basis.
When it comes to reporting income, employers will use one of these two types of forms:
- Form W-2 – A company will use this form for anyone who is employed within their organization. They make an estimation of how much tax that person will be required to pay for the year, and that amount will be withheld from every paycheck.
- Form 1099 – A company will use this form for anyone who works for them as an independent contractor. They do not withhold any tax from their paychecks, so it is the contractor’s responsibility to pay it.
Using a Professional to File an Individual Tax Return
Filing an individual tax return can be a difficult task for some people. Some people have their own business, and they have to show records of every business expense. They even have to track the amount of miles they have driven in order to run their operation. Others may have stocks, mutual funds, or other assets that can generate income. There are many different situations, and some of them require the help of a qualified tax professional.
For someone whose taxes are impossible to file correctly on their own, hiring a professional would be a valuable investment that can prevent any problems down the road. Anything from audits, back taxes, and even possible prison time could be waiting in the wings for someone who doesn’t file their taxes correctly.
It would be better to spend the extra money to get it done correctly, and to find someone who is informed of any new tax laws. That person would be able to analyze your business expenses and see which ones are deductible. He will also make sure you’re not paying too much.
If you’re looking for someone to help you file your taxes, you should consider using GLG Accounting. Their certified professionals will do everything they can to make sure you turn in a clean tax return every year. So, contact them today to find out what they can do for you!