When it is time to do your taxes, you want to ensure that you are doing everything correctly. Tax preparation in the US or anywhere else could be a daunting task, but as long as you know what you are doing, you should get this done without any issues. Paying income tax in the US is both your duty and a requirement as a citizen.
It is essential to file taxes every year. If you fail to pay your tax bills on time, penalties and fines might cost you. If you are eligible to receive an income tax return, doing your taxes on time will make more sense. There are free online tax preparation software you can use.
But if you don’t understand taxes very well, you can always from reputable companies. You can hire reputable tax consultants or service providers who will do the job and report to you at the end of the day.
By the end of reading this guide, you will understand the essentials about tax preparation in the US. Understanding the fundamentals will help you can make the process easier as well as know the right questions to ask if you choose to hire a professional.
How much does it cost to prepare taxes?
You might be asking yourself the this question ” How much does it cost to prepare my taxes?” Well it may cost you around $100-$600 to prepare taxes depending on the complexity of your case and who you are hiring. The price can go even higher if you hire a reputable firm to do this work for you. Of course, the fee you pay will depend on where you live and how much your annual income is.
It’s always a good idea to hire a professional tax preparer because they know all the terms, rules, laws, as well as loopholes that could work in your favor.
Making mistakes while filing your taxes is not a good idea at all. It may cost you penalties or even jail time if you are not careful about the process. Even if it’s costing you a few bucks, hiring a professional is always a good idea. They know the local tax laws, and they know how to file your taxes correctly. You can sit back and relax while it gets done for you.
How to file your US tax returns?
As we said, filing your US tax returns could be daunting. But it’s nothing if you have the proper knowledge about how this works. However, there are some important steps that you should know before filing your tax returns.
1. Tax filing deadlines:
You should know that you have an extended tax filing deadline. You can file your taxes up to October 15th of the following year. Even if April 15th is the national deadline, people working overseas or serving in the armed forces get extra time to file their taxes. So, you do not need to worry at all as long as you do it before the deadline.
2. Decide whether you want to file your taxes online or offline:
The IRS allows you to file your tax returns either online or offline. Nowadays, most people prefer to file their tax returns online because it’s fast and easy. However, you can always go with the offline method as well.
Online method: You can file your US tax returns online by going to the IRS website and clicking on the ‘file a return’ option. You will be asked to log in or create an account to file your taxes. After this, you have to provide all the relevant information about yourself and what you earned throughout the year.
Once you are done with the basic information, you need to submit the rest of your data. Now you can pay with your debit card, credit card, bank transfer, online check, or EFT. Once you do this, your taxes will be filed.
Offline method: If you prefer the old-fashioned way, you can go to your local tax offices and file your taxes. You have to download the appropriate forms and fill them up. Either mail it or hand carry it to the IRS office so they can process your taxes form.
Steps involved in US Tax Preparation
There are many tax preparation options you could go for. No matter which option you choose, there are the steps involved in completing the process successfully. So let’s look at what these important steps are;
1. Gather all the documents, receipts, records, etc.:
The first thing you want to do is get all the documents together. You should get your W-2 forms, 1040 forms, receipts of payments made by check or money order. Any other records like expenditure reports, health coverage information, etc.
2. Choose your filing status:
There are six different statuses you can choose from when filing your tax returns in the US. They are; single, married filing jointly or separately, married filing as head of the family, qualifying widow(er), and finally the head of household.
3. Find out whether you can claim some personal deductions:
You cannot file your taxes without claiming all the tax deductions you deserve to claim, like medical expenses, charitable contributions, education fees, etc. This is where a professional can reduce your income tax burden.
4. Fill out the tax forms:
Once you have all your documents and deductions ready, it’s time to start filling out the tax forms. You can either do it online or offline or both. If you are filing on paper, make sure you use only black ink because writing in pencil will not be accepted.
5. Make your payments:
And lastly, you have to make your payments. You can do this through direct debit, pay in person, Electronic Funds Withdrawal (EFW), or credit card payment. If you are making a payment after April 15th, it will be charged with interest until you pay the entire amount that is due for taxes. So make sure to pay your taxes on time.
Can you get more money if a tax preparer files for you?
The simple answer is yes. If you decide to hire a tax preparer to help you with your taxes, they will do their best to secure the maximum deductions and benefits for you. They know what kind of form you should file and which one is right for your situation.
They are highly qualified accountants who work for the best tax preparation companies (some might do it individually). They are well-versed with the whole taxation process, so it will be advantageous if you hire them to do your taxes.
However, keep in mind that not every tax preparation company is trustworthy. You have to take your time to go through their site and check which one has the best reviews. It’s advisable to hire someone who has been in the industry for years and has worked with thousands of clients throughout their careers. This is because even a silly mistake can cost you a lot.
Once you find your ideal tax preparer, you can sit back and relax. You can focus more on different things while the tax preparer does the heavy lifting. All you need to do is give them all the necessary information and documentation such as your income reports, bank records, receipts, etc. They will take care of the rest.
What is the minimum income to file taxes?
All US citizens are required to file their taxes. However, your tax burden is not fixed. Depending on your marital status and age, it might change. Below is a breakdown of the minimum income to file your taxes based on your status.
Single:
- Under the age of 65: The minimum income amount is $12,400.
- 65 or older: $14,250 to file a tax return.
- If you made more than $1,050 from investments, you must file a return.
Married:
- Both under the age of 65: $25,100
- Both over the age of 65: $27,800
- If your partner is under the age of 65: $26,450
Head of Household:
- Under the age of 65: $18,800
- 65 or older: $20,500
All the figures mentioned can be increased or decreased depending on the Government’s annual inflation factor. You might get deductions if you have kids, debts, mortgages, etc.
Bottom-Line
You should never forget that tax filing is not an easy job. It can be very complicated if you don’t know what to do and where to start. So it is always a good idea to hire a tax preparation service provider. They know all the rules of doing it correctly and maximizing your benefits. Good luck!