If this will be your first time to file a tax return, there are certain basic things you should know about U.S. taxation. But firstly, you may want to remember that the IRS has already announced that it will be accepting 2015 tax returns electronically beginning January 19, 2016.
Government collects taxes on income throughout the year through automatic withholdings from paychecks. Under the Internal Revenue Code (IRC) or the tax code, there are two types of income subject to taxation: ‘earned’ and ‘unearned’ income. ‘Earned’ income includes salary, wages, commissions, tips, bonuses, unemployment benefits, sick pay, and some non-cash fringe benefits. ‘Unearned’ income subject to tax includes interest, dividends, profit from the sale of assets, business and farm income, rents, royalties, gambling winnings, and alimony.
Then, at the end of the year, every person that earned income must file a tax return to determine whether the government did collect enough taxes through withholding, and also to determine whether the person may have paid too much taxes and is therefore entitled to a refund from the government. For the 2015 tax season, companies and businesses must furnish their employees, contract labor providers and others they pay income to, including royalties, with certain prescribed tax documents which contain the information needed to complete the individuals’ tax returns.
These tax documents you may need in order to accomplish your tax return include Form W-2 which is filled out by your employer stating your earnings for the calendar year, and Form 1099 which will be provided by those you worked for where you received income that isn’t salary, wages or tips. Form 1099 has several types like 1099-DIV (dividends, distributions, capital gains and federal income tax withheld from investment accounts, including mutual fund accounts), 1099-INT (interest income earned on investments), 1099-OID (Original Interest Discount for those who received more than the stated redemption price on maturing bonds), and 1099-MISC (which includes self-employment earnings, miscellaneous income such as royalties, commissions or rents, and all non-employee income that is not derived from investments).
After adding all taxable income, some types of expenses may be deducted from a person’s adjusted gross income, or ‘gross income minus adjustments.’ An individual taxpayer has the option of either excluding some income from taxation by using the standard deduction amount that has been determined by the government and his or her filing status or by itemizing certain types of expenses like mortgage interest, state and local taxes, charitable contributions, and medical expenses.
For the 2015 tax season, individuals are required to file a tax return by April 18, 2016, or they must officially request for an extension. You can calculate your own tax returns, or you may opt to avail of the expertise of professional tax preparers and accountants to be certain the paperwork is done correctly.
