5 Questions About Taxes Whose Answers You Should Know

Even if you use any tax preparation software, doing your tax return by yourself is still very challenging. All of us know that filing income tax service & tax code are complex. Tax code change constantly. This creates a great deal of anxiety & apprehension for some filers.

Here are 5 basics questions regarding filing tax whose answer you should know:

  1. There are so many different forms of tax. Which tax form I need to file my taxes?

W-2: This shows how much income you have made & how much you have paid in taxes while working for your employer during the whole tax year.

1099: You’ll receive a 1099-Misc if you weren’t paid as an employee, but you did work on the side & made more than $500 or you worked as an independent contractor. This form shows interest earned from the bank account of yours.

1098: If your child, your spouse, or you attended college, you’d receive a 1098-T for the education costs you’ve paid & a 1098-E for any student loan interest payments you’ve made of more than $500. You’ll require these forms since you can receive education credits & deductions.

Some other information you should’ve on hand when sitting down to do taxes of yours:

Social Security numbers: You’ll need the correct social security numbers for your spouse & everybody else you’re claiming as a dependent. According to the IRS, the most common filing mistakes is that most of people provide a malefactor SSN.

Receipts for donated items: If you made any charitable contributions during the year & you itemize your deductions, your these goodwills can reduce your taxes. Potential deductions include donations of goods or money to qualified charitable organizations.

  1. For parents, are there any tax deductions & credits available?

Well… Yes! If you had a baby 2015, you may receive a dependent exemption of $4000, which reduces your taxable income by that amount (even if you had baby on December 31th).

Some other credits which are available for parents include:

Child & dependent Care Tax Credit: If you paid for your any disabled family member to be able to work or for care of your child who is under 13, you receive a tax credit worth up to $1,000 for 1 dependent and up to $2,050 for 2 or more.

Earned Income Tax Credit: This available to working Americans who’ve a low or moderate income. This tax credit could mean cash back of up to $6,999 for somebody with 3 or more children. Previous year the average credit was $2, 000, according to the IRS.

Child Tax Credit:  This is another tax benefit for parents. This tax credit may be worth $1,000 for each of your child under 17.

  1. I am in college; can I deduct any of my expenses?

To fight the ever-increasing price of college education, the tax code provides bit relief via education tax credits & deductions. These deductions & credits include:

The American Opportunity Tax Credit: It actually helps parents & students in paying for college education by giving them a credit on tax return. That credit is up to $2,600 per student for tuition & fees, books, supplies & equipment.

The Lifetime Learning Credit: For college tuition, fees & supplies paid directly to your educational institution, you can claim a credit of up to $2,500 per tax return. The college courses don’t need to be part of any degree program.

Tuition & Fees Deduction: If you paid for college expenses for you, your spouse or your dependent, there is a deduction for up to $4,500.

  1. Can I claim my boyfriend or girlfriend on my tax return?

Many people know they can claim a personal exemption for their kids, but you might be able to claim exemptions for elderly parents, and also for other relatives that qualify as a dependent. For each and every dependent, you can deduct $3,800 from your federal taxable income.

  1. I did not make very much money last year—should I still file my taxes?

You will have to file your federal income tax return even if your previous year’s income was below the filing requirement. You can get a refund on any withheld federal income tax this way. The average unclaimed tax refund is more than $700.

Actually, there is a 3-year window on claiming past refunds. After that, money goes to the U.S. Treasury. If you want to claim a refund from 2 or 3 years ago, you need to make sure that all tax returns of all subsequent year have been filed.

In most of cases, refunds go unclaimed due to taxpayers who do not get well the IRS requirement. Therefore, they lose out on the tax refund to which they’re entitled