Income Tax Tips

INCOME TAX ADVICE
The money we pay on income taxes is used to build government funded projects like schools, roads, hospitals, etc.. No matter if you are a business or an individual tax payer, you pay income tax. The IRS (Internal Revenue Service) is a government run operation that is in charge of collecting the federal income tax and also for enforcing the tax laws implemented by Congress and the President.

You don't have a choice about paying income taxes. All citizens and businesses in the US are required to pay income tax. You won't necessarily need to pay income taxes annually. However, your income can be subject to be taxed in specific situations. You will have to file a tax return every year if you earn more than a certain income amount. If you don't file or even file on time, the IRS will come after you not only for payment but you will also have to pay hefty penalties.

Whenever you owe income taxes, you are going to be paying them all through the year. Any time you begin new employment, you are going to have to fill out a W-4 or W-9 form. A W-4 will allow you to designate your filing status and employer withholdings and the amount of exemptions as well as the correct amount of taxes. Your employer will send your taxes on your behalf based on the info you input on your W4 to state and local governments as well as the federal government.

If you are an independent contractor, you will need to fill out a W-9 for every party you are being paid by. A W-9 is simply a form for your tax payer ID or your social security number (if you are not incorporated) so that you earnings can be reported to the government. With a W-9 you are going to be responsible for remitting payment for income taxes to the Internal Revenue Service.

At the conclusion of the tax year, you will file an income tax return for that previous year with the IRS. You will receive a refund in the event that you paid more taxes than you needed to. On the contrary, if you did not pay enough taxes throughout the year, you will be required make additional payments to the government. The tax payment due date is April 15 (for the previous years taxes). If you do not pay on time, you are likely going to incur additional penalties and interest.

The rate of taxes you pay will depend on how much money you earn. The tax brackets are: 35%, 33%, 28%, 25%, 15% and 10%. Obviously, the more you earn, the higher tax bracket you will be in. For example, if you earned $8,025, you will be subject to pay 10% taxes on that income, while an income over $357,700 is going to be taxed at a rate of 35%. It is important to note that the tax brackets are going to change every year. You should check sites like Five Cent Nickel annually to find out what tax rate you are going to qualify for.

You have the ability to reduce your tax responsibility by taking advantage of particular tax benefits that will lower the amount of your income that is taxable. Any contributions that you make to your 401k are tax deductible as are charitable contributions. Make sure you keep record of all of your expenses that are tax deductible every year so that it will be simple for you accountant/tax preparer to maximize your benefits.

Income Tax Loans - Helpful in the event you don't the funds available when it comes time to pay your taxes.
Paying Taxes on Tips
Tips For Avoiding an Audit
What To Do If You Are Audited - Consider hiring a CPA for help.

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