Filing taxes can be stressful for anyone, let alone for people who are just learning how to file their taxes. Millennials, who may be filing taxes for the first time, often have questions about filing taxes. Although the process may seem intimidating, a tax accountant can help you navigate the challenges of filing taxes. The more you learn and understand about the tax system, the easier it is to file correctly.
Who Files Taxes?
Most people need to pay taxes, but CPA firms in Charlotte NC can tell you if you meet the exemption requirements. Taxes are based on income, but tax payments are only required for an income of a certain level. First-time tax filers only need to file taxes if they meet specific criteria, including age, dependency status, and filing status. There are ten different categories of filing status and income threshold levels that millennial filers should be aware of.
What if You Don’t Meet the Filing Requirements?
Even if you don’t meet the requirements for filing taxes, you might want to consider filing anyway. Filing taxes, even if you don’t have to, might make you eligible for tax breaks and refunds. You may want to consider filing taxes if you have had any income tax withheld from your regular paychecks. If you had a refund from the previous year applied to the current year’s estimated taxes or made estimated tax payments, you may want to consider filing. And if you qualify for credits, it’s certainly in your best interest to file your taxes for the year.
How Are Taxes Calculated?
Once you know that you need to pay taxes, you naturally wonder how much you owe. The government uses a system to determine how much you owe in taxes by dividing your total taxable income into sections called “tax brackets.” Each tax bracket is assigned a specific tax rate. A tax bracket corresponds with a particular section of your taxable income, which means that the tax rate for one bracket doesn’t apply to your total taxable income.
What Information is Needed to File Taxes?
Taxpayers must provide the government with certain information to calculate taxes. You can either collect the information yourself and send it in or have an accountant handle the filing process for you. Either way, you will need to provide proof of income, all tax-deductible expenses, expenses that might amount to a tax credit, and evidence of any taxes that you have already paid during the year.
Ideally, your tax preparation checklist should include:
- Social security number
- W-2 form
- 1099 forms
- Retirement account contributions
- Property taxes and mortgage interest
- Charitable donations
- State and local taxes
- Educational expenses
- Medical bills
- State and federal tax returns
When you file taxes, you will need to supply a Social Security number for yourself, your spouse, and any dependents.
A W-2 form indicates how much you earned in the past year, and it shows how much you have already paid in taxes. If you have more than one job, you may need to prepare a W-2 form for each job you held if you have a qualifying income level.
IRS 1099 forms may also need to be submitted. These forms record that a person or an entity, not your employer, has paid you money. A 1099 form is usually required for artists, freelance writers, and contractors. A form is required for anyone who receives more than $600 from a client during the year. The person or entity who provided your source of income must complete the 1099 first and then mail it to you to finish. The form should arrive by January 31st each year unless there are unique circumstances.
The Power of Deductions
One helpful tip for new filers, a tax accountant can tell you, is to take advantage of deductions when possible. Deductions can lower your taxable income and even help you qualify for refunds. You may be eligible for deductions for your household or business. Therefore, it’s essential to track receipts and expenses such as business-related transactions, travel, and mileage. However, keep in mind that some expenses related to business fall into the category of personal expenses rather than business expenses, such as business gifts and lunches with co-workers. There may be limits on the number of tax deductions you can receive for expenses that fall into personal categories, but Charlotte accountants can help you figure out what expenses qualify and which ones do not.
How to File Taxes
Once you’ve assembled your tax paperwork and determined how much you owe in taxes, the next step is to file them. There are three basic ways to file your taxes:
- completing an IRS Form 1040 or Form 1040-SR by hand and mailing it in
- hiring an accountant
- using tax software for filing online
Of the three options, mailing in tax paperwork is not recommended due to the possibility of mail getting lost or delayed. For novice tax filers, hiring a skilled accountant is generally the best option.
If you are ready to get started on taxes, you are probably wondering, “where is the best accountant near me”? For that, you can turn to Scott Boyar CPA for assistance. Scott Boyar, a top-rated tax accountant in Charlotte, has experience helping novices file taxes. Contact Scott today for help with your taxes and for any other tax-related questions you have.