Everything You Wanted To Know About Taxes; But Daren't Ask!

The tax burden charged to an individual's or corporation's income is known as income tax, which is a direct tax. Individuals are taxed on their total income, taking into account standard deductions. Corporations or businesses are taxed on their net income, which is the difference between gross receipts and net expenditure. Companies would have to pay corporate or corporation tax. Tax is charged on wages, business income and capital gains.

Anyone who works in the United States has to file income tax returns and pay federal income tax by the 15th of April every year. If you cannot do so then you can apply for an extension from the IRS by filing Form 4868. You must then file within four months, by August 15th.

There are two major types of tax systems, flat rate and progressive. Flat tax rate is when all earnings are charged at the same rate. Progressive taxes are calculated differentially, based on how much has been earned. For example the first $10,000 of income will be charged at a higher rate, and the following ones would be charged at progressively lower rates. Deductions help individuals and companies pay a lower amount in taxes.

U.S. residents have to file Form 1040. Non-resident Americans will have to file Form 1040 NR. If you are exempt from taxes, you then file Form 8843. The most essential documents you need are your visa, passport, and social security number or TIN (Tax Identification Number).

As an employee of a firm you will file the W-2 form, while the self-employed will need to file Form 1099. If you generate income from investments, dividends, royalties or rental income you will also need to file the 1099 form.

If you have paid interest on mortgage or real estate taxes, you will be mailed a 1098 along with this information. These forms come in triplicate, so send the original to the IRS, and keep the copies carefully.

The IRS e-file program makes it easy to file your taxes online. Before you do so, get a PIN number. For this you will need to give your birth date, social security number, and information from your previous year's tax return.

A single person files an individual tax return. Those who are married can file jointly or as individuals. There are many rules for separated, divorced or couples living together. Ensure you do a thorough research of the class relevant to you. Also, look closely at the rules governing dependents. Do keep in mind that the social security number of the dependent has to be put on the return; also child support payments are not deductible.

After filing, if you owe taxes, pay before the deadline, or you will face penalties. You may also be owed a refund if you have overpaid your taxes. These can be paid directly or by check. Make sure to include bank account information when you are filing the form.

With your income tax returns, you can claim standard or itemized deductions. These are for mortgage, student loans, some specific expensive medical treatments, charities and business expenses. The originals of 1099 forms and documentation of these deductions must be sent to the IRS.

For more detailed information on filing your tax returns please visit here.

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YOUR TAX PAYMENT OPTIONS

If you cannot pay the full amount of taxes you owe by the April deadline, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. There are also alternative payment options to consider:

* Pay by Credit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover cards. To pay by credit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. The service providers charge a convenience fee based on the amount you are paying. Do not add the convenience fee to your tax payment.
o Link2Gov Corporation: 888-PAY-1040 (888-729-1040), www.pay1040.com
o Official Payments Corporation: 800-2PAY-TAX (800-272-9829), www.officialpayments.com
* Extension of Time to Pay Based on the circumstances, a taxpayer could qualify for an extension of time to pay. The IRS is willing to allow extensions of time to pay in order to assist in tax debt repayment. A short term extension of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. Taxpayers qualifying for an extension of time to pay of 30 -120 days generally will pay less in penalties and interest than if the debt were repaid through an installment agreement.
* Installment Agreement The IRS may allow you to pay any remaining balance in monthly installments through an installment agreement. You can apply for an IRS installment agreement using our Web-based Online Payment Agreement application on IRS.gov. Another alternative is to attach a Form 9465, Installment Agreement Request, to the front of your tax return. The IRS charges a $105 fee for setting up an installment agreement. The fee is only $52 if you pay via direct debit. If your income is below a certain level (see Form 13844), you may qualify for a $43 fee. You will also be required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month, after the due date that the tax is not paid. If you do not file your return by the due date -- including extensions -- you may have to pay a failure-to-file penalty.

In most circumstances, the Online Payment Agreement application provides immediate notification regarding the approval of your request. There may be times when you will need to mail paperwork or speak with us before we can determine your eligibility for an installment agreement or short term extension to pay. If that is the case, the online application will provide an address and telephone number that can be used to reach the appropriate IRS office.

For more information about filing and paying your taxes, visit the IRS Web site at IRS.gov and choose "1040 Central" or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at IRS.gov or request a free copy by calling toll free 800-TAX-FORM (800-829-3676).

IRS TIPS FOR LAST-MINUTE FILERS

With the tax filing deadline close at hand, the IRS offers some tips for those still working on their paper tax forms:

* Consider filing electronically instead of using paper tax forms
* Put all required Social Security numbers on the return
* Double-check your figures
* Sign your form
* Attach all required schedules
* Send your return or request an extension by the April filing deadline

Choosing to e-file your tax return instead of preparing a paper tax form is the best step you can take to ensure that your return is accurate and complete.

When you file a paper return, the numbers to check most carefully on the tax return are the identification numbers - usually Social Security numbers - for each person listed. This includes the taxpayer, spouse, dependents and persons listed in relation to claims for the Child and Dependent Care Credit or Earned Income Tax Credit. Missing, incorrect or illegible Social Security Numbers can delay or reduce a tax refund.

Taxpayers filing paper returns should also double-check that they have correctly figured the refund or balance due and have used the right figure from the tax table.

Taxpayers must sign and date their returns. Both spouses must sign a joint return, even if only one had income. Anyone paid to prepare a return must also sign it.

People sending a payment should make the check out to "United States Treasury" and should enclose it with, but not attach it to the tax return or the Form 1040-V, Payment Voucher, if used. The check should include the taxpayer's Social Security number, daytime phone number, the tax year and the type of form filed.

By the April due date, taxpayers should either file a return or request an extension of time to file. Remember, the extension of time to file is not an extension of time to pay.

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