How to Avoid Tax Problems
Pick the correct filing status., Figure out whether you need to file., Choose the right type of 1040., Figure your deductions, exemptions and tax credits., File your taxes.
Step-by-Step Guide
-
Step 1: Pick the correct filing status.
A person’s filing status has a huge effect on their taxes, influencing numerous deductions and tax credits.
Therefore, you should determine which filing status you fall under before you do anything else.
Single.
A single filer is an unmarried filer.
Although a single filer can claim dependents, other designations are usually more advantageous.
Married filing separately.
Married taxpayers who file separately tend to have two characteristics: a high income and a large amount of itemized deductions.
In fact, if one spouse itemizes deductions, the other spouse cannot take the standard deduction.
Under most circumstances, it is more advantageous for a married couple to file jointly, so even if separate filings are best in one year, don’t assume they will be for every year.
Married filing jointly.
Most spouses file jointly under most years.
That means the couple turns in one tax return for both spouses.
This tends to result in lower tax liability and access to more deductions and credits.
Head of household.
The head of household designation is reserved for unmarried caretakers of a dependent—usually a single parent.
The head of household must pay more than 50% of the expenses for the dependent. -
Step 2: Figure out whether you need to file.
The vast majority of adults in the United States will need to file a tax return, but a minority won’t.
If a person’s yearly income isn’t equal to the standard deduction plus one exemption per person, they are tax exempt.
While the amount of the personal exemption is the same regardless of filing status ($4,050), the standard deduction changes.Single tax filers get a standard deduction of $6,300, meaning a single person making $10,350 or below is tax exempt.A married couple filing jointly gets a deduction of $12,600, meaning a married couple making $20,700 or less is tax exempt.
If a filer is designated as a head of household, they can claim a deduction of $9,300, making them tax exempt at $13,350 or below. , The 1040 is the form used to file personal income taxes.
The three types of 1040 are used for different types of tax situations, with 1040EZ being the simplest to file, and the regular 1040 being the most complicated.The 1040EZ is reserved for filers who make less than $100,000 per year, and/or have no dependents, and make less than $1,500 per year in interest income.
In addition, they must be single, married filing jointly, and under
65.
The 1040A works best for filers who make less than $100,000 per year, and/or receive income from capital gains, and adjust your income according to contributions to an IRA and student loan interest.
You should use the 1040 if you make more than $100,000 per year, and/or claim itemized deductions, are self-employed, or claim income from the sale of property.
Those who claim head of household status can file either the 1040A or the 1040, but not the 1040EZ. , A deduction is a type of expense the IRS agrees not to count towards your income.
An exemption is a type of deduction available for yourself and any dependents you may have.
A tax credit is money the government gives to you.
So instead of you subtracting an amount from your income as you would with a deduction, you simply get a fixed dollar amount for the tax credit.
Once you have figured which deductions to claim and which credits apply to you, you will have your tax liability for the year.In 2016, the value of an exemption stood at $4,050 per person.
The list of deductions are far too numerous to count here.
Although most people are better off using the standard deduction of $6,300, there are people who can further reduce their tax liability by claiming an itemized list of deductions.
Although you can find a list of deductions and tax credits at https://www.irs.gov/publications/p17/pt06.html, you’re probably better off using an electronic filing program, like TurboTax (especially if your income is from wages and you are single), and using the services of a tax preparer if your taxes are more complicated.
If you make less than $54,000 a year, you can get free help from the IRS.
Go to https://www.irs.gov/individuals/free-tax-return-preparation-for-you-by-volunteers to find a tax preparer near you. , Once you’ve finished figuring your tax liability for the year, you only have to file the 1040 with the IRS.
By far, the most popular method of filing taxes is by using the IRS’ efile system.
You can efile at https://www.irs.gov/filing/e-file-options.
If you feel like sending in a paper form, you can do that as well.
Just print out a paper 1040 https://www.irs.gov/uac/choose-the-simplest-tax-form-for-your-situation/. -
Step 3: Choose the right type of 1040.
-
Step 4: Figure your deductions
-
Step 5: exemptions and tax credits.
-
Step 6: File your taxes.
Detailed Guide
A person’s filing status has a huge effect on their taxes, influencing numerous deductions and tax credits.
Therefore, you should determine which filing status you fall under before you do anything else.
Single.
A single filer is an unmarried filer.
Although a single filer can claim dependents, other designations are usually more advantageous.
Married filing separately.
Married taxpayers who file separately tend to have two characteristics: a high income and a large amount of itemized deductions.
In fact, if one spouse itemizes deductions, the other spouse cannot take the standard deduction.
Under most circumstances, it is more advantageous for a married couple to file jointly, so even if separate filings are best in one year, don’t assume they will be for every year.
Married filing jointly.
Most spouses file jointly under most years.
That means the couple turns in one tax return for both spouses.
This tends to result in lower tax liability and access to more deductions and credits.
Head of household.
The head of household designation is reserved for unmarried caretakers of a dependent—usually a single parent.
The head of household must pay more than 50% of the expenses for the dependent.
The vast majority of adults in the United States will need to file a tax return, but a minority won’t.
If a person’s yearly income isn’t equal to the standard deduction plus one exemption per person, they are tax exempt.
While the amount of the personal exemption is the same regardless of filing status ($4,050), the standard deduction changes.Single tax filers get a standard deduction of $6,300, meaning a single person making $10,350 or below is tax exempt.A married couple filing jointly gets a deduction of $12,600, meaning a married couple making $20,700 or less is tax exempt.
If a filer is designated as a head of household, they can claim a deduction of $9,300, making them tax exempt at $13,350 or below. , The 1040 is the form used to file personal income taxes.
The three types of 1040 are used for different types of tax situations, with 1040EZ being the simplest to file, and the regular 1040 being the most complicated.The 1040EZ is reserved for filers who make less than $100,000 per year, and/or have no dependents, and make less than $1,500 per year in interest income.
In addition, they must be single, married filing jointly, and under
65.
The 1040A works best for filers who make less than $100,000 per year, and/or receive income from capital gains, and adjust your income according to contributions to an IRA and student loan interest.
You should use the 1040 if you make more than $100,000 per year, and/or claim itemized deductions, are self-employed, or claim income from the sale of property.
Those who claim head of household status can file either the 1040A or the 1040, but not the 1040EZ. , A deduction is a type of expense the IRS agrees not to count towards your income.
An exemption is a type of deduction available for yourself and any dependents you may have.
A tax credit is money the government gives to you.
So instead of you subtracting an amount from your income as you would with a deduction, you simply get a fixed dollar amount for the tax credit.
Once you have figured which deductions to claim and which credits apply to you, you will have your tax liability for the year.In 2016, the value of an exemption stood at $4,050 per person.
The list of deductions are far too numerous to count here.
Although most people are better off using the standard deduction of $6,300, there are people who can further reduce their tax liability by claiming an itemized list of deductions.
Although you can find a list of deductions and tax credits at https://www.irs.gov/publications/p17/pt06.html, you’re probably better off using an electronic filing program, like TurboTax (especially if your income is from wages and you are single), and using the services of a tax preparer if your taxes are more complicated.
If you make less than $54,000 a year, you can get free help from the IRS.
Go to https://www.irs.gov/individuals/free-tax-return-preparation-for-you-by-volunteers to find a tax preparer near you. , Once you’ve finished figuring your tax liability for the year, you only have to file the 1040 with the IRS.
By far, the most popular method of filing taxes is by using the IRS’ efile system.
You can efile at https://www.irs.gov/filing/e-file-options.
If you feel like sending in a paper form, you can do that as well.
Just print out a paper 1040 https://www.irs.gov/uac/choose-the-simplest-tax-form-for-your-situation/.
About the Author
Richard Bishop
Professional writer focused on creating easy-to-follow crafts tutorials.
Rate This Guide
How helpful was this guide? Click to rate: