If you have an income in the US, you are supposed to file tax returns every year. Your gross income (total annual income), age, filing status, and whether you are an independent person are what determine whether or not you are supposed to file tax returns. As long as your total deductions are less than your annual income, you are supposed to file a tax return.
Here is how you should file taxes correctly as a US resident.
1. Begin By Gathering Your Tax Forms
To complete the tax return, there are some financial details you will need. Below are some of the documents you should collect ahead of beginning to file your tax returns. These documents are supposed to be delivered to you by mid-January, but follow up with the sender if you haven’t received yours.
- W-2 Forms
This is the form used by your employers to disclose the amount you earned within a given period and the amount of tax they have already withheld. Suppose you have many employers and they all withheld tax, each of them will have to issue you with a W-2 form. Al companies are expected to email all W-2 forms by 31st January, which means your copy should have arrived by early February.
- 1099 Forms
The 1099 form is what reports any earnings you received outside of what is included in the W-2 form. There are many versions based on the sort of income. You will realize that some forms feature Social Security Benefits (SSA-1099), income from interest (1099-INT), distributions from pensions (1099-R), and the list continues.
2. Find Out Your Filing Status
Your filing status is what is used to determine your filing requirements, tax rates, amount of standard deduction, and eligibility for tax credits. There are up to five different filing statuses, and you will always depend on your marital status as it was on the final day of the tax year. It is also possible to qualify for more than one status, and there is a procedure to determine that.
3. Determine Your Tax Bracket
The amount of money you pay in tax will also be determined by your tax bracket. There are up to seven marginal brackets in the US, and they range from 10% to 37%. There is a lower and upper limit in each tax bracket. The rate of tax you will pay will determine the margin within which you fall.
How To File Your Tax Return in The US
1. Complete Form 1040
In the US, to file your tax return, you should begin by completing Form 1040. The instructions for filling up Form 1040 are easy to follow. You only need to add all the income you earned with the year. You will then claim credits and deductions to adjust that particular income. After doing that, you will calculate the amount of tax you paid to determine if you paid enough.
2. Complete the e-File
Filing electronically is one of the easiest and most convenient ways to file your tax returns. This method is also known as the e-file. There are many free online resources and instructions that you can use to learn more about completing your Form 1040 online and attach the necessary documents. After doing that, you will submit your tax return electronically. IRS strongly encourages US residents to use the e-filing method because it is easy to process, and you will only wait a few weeks to get your refund.
If you are unsure what tax bracket you fall under or if you qualify as a US resident, there are also resources that can tell you if you are a US resident for tax purposes or not. This is especially important if you work in the US but haven’t become a citizen or just became a citizen etc.
3. Complete The Paper Form
You are strongly discouraged by IRS from mailing a paper form since, besides taking longer to process, it is less secure. You might have to wait several months before receiving a refund, which is way too long compared to e-filing that only takes a few weeks. IRS also reports that at least 21% of paper forms have errors on them, while e-forms have less than 1% errors. However, if you want to file a paper form, you can find them on the IRS website.
Closing Thoughts
If you are not sure how to file your tax returns or feel that you might make some mistakes, you can work with an expert. They will guide you through the process and ensure that you put everything that is required to complete filing your tax returns.
