Friday, 30 March 2018

How to Do Your Taxes EXPLAINED!

With Tax Day (April 15th) approaching, here is your (mostly) complete guide to federal income taxes, state income taxes, tax returns, IRS forms, IRS refunds, 1040EZs, 1099s, and other things you need to know in order to file your tax return. (TL;DR: don't worry, you got this.)

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IRS Free File: W-4 Info: Form(s): 4868: A: Form(s): Association of Enrolled Agents: by:

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Gary A. Hensley, MBA, EA (You can check out Gary's blog at on the W-4:

Two general examples about "tweaking the W-4" are important enough to review here:

(1) You may be single and claim 1 exemption but you have other significant investment income (such as dividends, interest, or capital gains) on which no federal income tax is withheld that will be added into your tax return at the end of the year. While 1 exemption might cover the tax due on your wages, it is doubtful it will cover your investment income, so folks in this position, will usually claim zero exemptions to have more income tax taken out to also help cover the investment income.

(2) You are newly married, and you and your spouse update your W-4 to claim "married" with 1 exemption. This 1 exemption could be sufficient to cover each spouse's income but when the two incomes are combined on their joint tax return, it will "push" a portion of their income into a higher tax bracket (called the "marginal tax bracket") that the withholding tables do not factor in. Thus, the newly married couple could owe a significant income tax balance at the end of the year. This married couple should consider claiming zero exemptions on their W-4's and also the option to voluntarily "add" a fixed dollar amount to their federal withholding such as $25 per paycheck. They also have the option of checking the W-4 box that says, essentially, "I am married but want my withholding deducted as if I were single." The single withholding tax table takes a larger amount of income tax at every level of income earned.

INFO ABOUT THE SCHEDULE A:

If you itemize deductions such as mortgage interest, property taxes, contributions, union dues, and medical expenses, those items will be included on Schedule A. Itemized deductions will ONLY be used if that total exceeds the amount of your standard deduction for your filing status. The 2013 standard deduction for a single filer is $6,100 and for married, filing jointly it is $12,200. These amounts will go up slightly for 2014 returns. Each exemption (personal and dependent) is worth $3,900 in 2013. In short, this means that a single filer, in 2013, could have income up to $10,000 ($6,100 + $3,900) and owe no income tax (thus getting a full refund of federal income taxes withheld). To get the $3,900, the single filer must not be claimed as a dependent on someone else's return.

INFO ON TAX EXTENSIONS (FORM