A tax return is a form that allows you to report income, expenses, and all particulars related to your income tax for the current financial year. The form also helps you to calculate your tax liability to schedule payments or request for a refund. Every citizen of the country is required to pay taxes to the federal government on income earned, whichever way the tax rate and assessment are applicable. For the 2018-2019 assessment, the minimum tax applicable is set at 10% of your income and the maximum rate for high-value assessees is set at 37% of the income. There are multiple factors related to income and exemption that must be considered before you can calculate your tax return for the current assessment year, due in the month of April 2019.
The Internal Revenue Service (IRS) classifies your income tax return into five different forms depending on the status of the assessee. These include:
- Form 1040 long form tax return
- Form 1040A short form tax return
- Form 1040EZ tax return for single and joint filers with no dependents
- Form 1040NR tax return for U.S. Nonresident alien
- Form 1040NR-EZ tax return for U.S. Nonresident alien with no dependents
You must first identify the proper form applicable to calculate your income tax return. The following points should also be considered before filing with the IRS.
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Filing requirement
Form 1040 will have a different filing requirement in comparison to form 1040NR-EZ. You must check the terms, conditions, and exemptions applicable for filing your income tax return before making an estimate. -
Determine the filing status
Before you calculate your tax return, it is also necessary to determine your filing status. Single filing, married filing jointly, married filing separately, head of the household, and qualifying widow(er) with a dependent child are the five primary types of status, each with a separate form for income tax purposes. -
Dependents and personal exemptions
Apart from declaring your income, you must also account for personal exemptions to calculate your tax return. Note that exemptions reduce the tax burden significantly every year. -
Form W-2
You must report your income for the tax year by declaring the particulars in the W-2 wage and tax statements. It is a comprehensive account of your total income for the financial year. -
Deductions and tax credits
Deductions help reduce the amount of the taxable income and tax credits help reduce the actual tax applicable. It is essential to take into account all deductions and credits as these amounts also increase the chances of you receiving a tax refund for timely filing. It is absolutely crucial to consider all amounts for single and joint filing.
The process might be complicated for first-time filers. However, you can make use of both free and paid software developed by companies that provide tax and financial planning assistance. HRBlock.com, efile.com, 1040.com, turbotax.com, libertytax.com, taxslayer.com, and taxact.com are among some of the popular websites available at your service to help calculate your tax return.
Most tax calculators feature a step by step process that starts by ascertaining your filing status. You must take note that your deductions and tax credits will vary accordingly. The next step requires you to input your total household income which is the summary of your salary, income from interests, dividends, alimony, retirement distributions, unemployment compensations, and social security benefits. Age is another crucial information as tax rules vary according to your age. The next step is to key in the number of dependents that will help you claim exemptions subject to relevant terms and conditions.
Contributions made to your 401(k) and other individual retirement accounts must also be taken into consideration as these amounts help reduce the tax burden incurred. The calculator also takes into account the standard deduction of $12,000 in case there is no 401(k) or IRA applicable for the current assessment year. Finally, you must input the amount of taxes paid or withheld by your employer and this will help you calculate your tax return.