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Importance and Procedures of Filing Tax Returns

Importance and Procedures of Filing Tax Returns

Importance and Procedures of Filing Tax Returns

A tax return is a form or forms which are filed with a local or national taxing authority. It reports pertinent information, such as, income, expenses etc. It is a legal requirement of Filing Tax Returns in almost every country. It is no different in the United States. Tax returns allow the taxpayers to;

I) Calculate how much they owe to the state in the form of taxes.
II) They can calculate their tax liability.
III) They can schedule tax payments.
IV) They can request refunds in case they have overpaid their taxes.

Usually filing for a tax return is done annually. It holds true either for an individual or a business which generates taxable income. A business is liable to pay taxes over;

I) Wages
II) Interests
III) Dividends
IV) Capital gains
V) Other profits etc.

The Tax returns are filed with Internal Revenue Service (IRS). IRS is the primary Tax based agency in the United States. You can file your tax forms containing information used to calculate taxes with IRS on a federal level, or with the state level agencies, like Massachusetts Department of Revenue. The tax forms are generally prescribed by the tax agencies, primarily by IRS or other relevant institutions. In U.S., the IRS provides the individuals with variations of their form 1040 to file their tax returns. The corporations can use the IRS Form 1120 and partnerships can use the IRS Form 1065 to file their annual tax returns. Reporting the income from investments can be done through IRS Forms 1099. If any individual or a corporation wishes to file for an automatic extension of time limits on their tax return filings, they must use the IRS Form 4868.

Typically, a tax return begins with the taxpayer providing personal information. It includes the filing tax return late or early status, and dependent information of the individual tax payer or the corporation.
 

Sections of a Tax Return Form

There are three sections in a typical tax return form. They are listed as follows;

1. The Income Section:


The Income Section of the tax return lists all of the sources of income which the individual or the corporation has. The most common method of reporting it is a W2 Tax Form. There is a list of things that must be reported in this form; such as, wages, dividends, self-employment income, royalties and in many countries, capital gains.
 

2. Deduction Section:

 
Deductions decrease the tax liability. The Tax Deductions vary considerably depending upon the respective jurisdiction. The typical examples include; aids to retirement savings plans, the alimony paid to ex-spouses, and interest deductions on some respective loans. It must be kept in mind that for businesses, many expenses directly related to business operations fall into the category of deductibles. Taxpayers may itemize deductions or use the standard deduction for their filing status as per their personal preference. Once the subtraction of all deductions is done, the taxpayer may determine their newly calculated tax rate on their adjusted gross income.
 

3. Tax Credits Section:

Tax Credits are the fiscal amounts that offset tax liabilities or the taxes owed. Just like deductions, the credits also vary widely depending upon the respective jurisdictions. Mostly though, there are credits attributed to the care of dependent children, as well as seniors. Government sanctioned necessities like pensions, education and the likes are also more popular avenues for credits.
 

IRS Form 4562

Form 4562 is used for claiming deductions for the depreciation or the amortization of property, whether it is tangible property or intangible. It includes all the land-based properties, such as, buildings, machinery or other forms of equipment. The intellectual property, such as, patents can also include in it. Land based Plots, orchards and arable fields cannot depreciate; therefore, they can not be reported on the form 4562. In the United States of America, it is recommended by the IRS that filers must make sure to retain tax returns for at least three years after the time limit has passed and they have been paid. It is possible for other factors to cause more prolonged retention than three years. Some situations on the other hand, may require indefinite retention of filed returns. If a tax return contains errors, an amended return should be submitted to correct the discrepancy immediately, because it will cause headaches for the individual or the organization later on, and will needlessly cause them to spend time and resources for the respective corrections.
 

Advice

SG Inc. CPA is an organization that is based from Dallas, Texas, so if you are ever in need of filing tax return in Dallas, you can contact us. Our team can guide either an individual or an organization how to go about settling their debts with minimal difficulties. The tax filings can be easily done through our agency. We have more than a decade of experience in every field related to taxes. We can not only guide you through the pitfall of procedures that come by dealing with IRS, we can also solve them on
your behalf if you Contract Us.