The IRS processed more than 162 million returns in 2023, which might increase this year. A tax return is a crucial financial document filed by individuals and businesses with the government to their income, expenses and other tax-related information. This document helps in determining how much tax a taxpayer owes to the government or how much refund they are entitled to receive. It also details other aspects of your finances, such as deductions and credits.
Every year, taxpayers are required to submit their tax returns by a specific deadline, usually April 15 in the United States. Understanding what a tax return entails is crucial to managing your financial situation effectively and making informed decisions about your tax obligations.
What is a Tax Return?
A Tax Return is a yearly form that every citizen has to file with the government (IRS) to report their income in the previous year. It is a layout of their income within the year and considers factors like deductions, credits, and interests. A taxpayer can claim credits and request a return after filing their taxes with the IRS. Filing a tax return is mandated annually to help ensure compliance with federal tax laws. It also provides a way to reconcile what was paid versus what is owed to the government.
Understanding The Basics of a Tax Return
In this section, we will understand the critical components of a tax return.
Income
Your income includes your salary, wage, interest, dividend, and any other form of income. You have to file taxes on this income.
Deductions
Deductions are The expenses you can remove from your income to lower your tax amount.
Credits
The reduction in tax bill dollar-for-dollar is credit. You can fill your tax returns in two ways:
- Electronic Filing
- Paper Filing (By mail)
If you file your tax return on time and correctly, you can avoid penalties and claim returns from the IRS. You can get a refund within weeks and pay the remaining taxes to the government.
Filing Your Tax Return: A Step-by-step Guide
Filing taxes can become a complex task if proper steps are not considered. Here is a list of steps that can help you understand the process of filing your taxes.
Step 1: Gathering Documents
You should collect all your tax documents. These files should include W-2s, investment statements, deductible expense receipts, and proof of tax credits (if applicable).
Step 2: Which Tax Form to Select
You will find multiple available tax forms. You can select any of these forms depending on your situation. The IRS can help you find the proper form. You can also get help from a professional in choosing the correct form.
Step 3: Filing Taxes
You can file electronically or via mail. Most taxpayers prefer e-filing due to its speed, accuracy, and error correction ability. You can get quicker returns with e-filing as well!
Filing Electronically
If you are filing your taxes online, follow the instructions on the website and enter the required details. After you complete your return, you can submit it electronically by signing it.
Filing via Mail
Fill out the required form by hand or with the help of tax preparation software. Further, check your entries and mail your tax returns to the designated IRS address.
Maintain a copy of the documents and tax filing forms for reference.
Step 4: Tracking Refund
If a refund applies, wait a few weeks to hear from the IRS. You can use the “Where’s My Refund?” tool on the IRS website to check progress.
Step 5: Paying Taxes
Pay your taxes in full by the stated deadline. Avoid being late; you may have to pay penalties and interest charges. You can select between payment options on the IRS website.
Common Mistakes To Avoid When Preparing Your Tax Return
Errors can occur anytime you are dealing with taxes. Here are some common mistakes you should avoid while filing your return.
Calculation Errors
You may enter incorrect numbers into the forms. As surprising as it may sound, this mistake is common among taxpayers. You can review your income documents, deductions, and credits to ensure you fill in the correct information. Use Beem’s Tax Calculator to avoid mistakes.
Form Filling Mistakes
The IRS offers multiple tax forms. Depending on their situation, taxpayers must fill out the required form. If you select the required form for yourself with errors, you can get help from the IRS website.
Filling your form electronically can help reduce errors and provide better speed and security.
Not Including Required Information
Every tax return applicant shall include the required documents. This information includes W-2s, 1099s, deduction receipts, etc. Make sure to enter your correct Social Security Number.
Late Filing
If you file your returns electronically or by mail past the due date, you are subject to penalties and interest charges. If you won’t be able to file your taxes by the given deadline, you can apply for an extension with Form 4868.
How To Choose The Right Filing Status On Your Tax Return
Your tax filing status can impact your tax liability, owing, and receiving amount. Here are some factors to consider while filing your tax returns.
- Your marital status will impact your tax returns. You can choose between single, married (filing jointly), or married (filing separately).
- Take your income into consideration. If you are married, consider your income status and the difference in amount compared to your spouse.
- Your filing status may vary if you have any dependents or people you provide for.
- Finally, research the credits and deductions you qualify for and how they vary for filing statuses.
Tax Deductions Vs. Credits: Maximizing Your Return
Understanding the meaning and difference between tax deductions and credits is crucial to maximize your returns.
Tax Deductions
Tax deductions can reduce your taxable income. A deduction shrinks the tax amount you have to pay to the IRS. You can reduce mortgage interest, charitable money, local taxes, and student loans. You can also choose items for deductions and receive a reduced amount per item.
Tax Credits
Credits allow you to get a dollar-for-dollar reduction in the tax. You can claim these credits for Income Tax, Child Tax, Retirement Savings, etc. You can get tax credits based on income, marriage, dependents, and related factors.
Maximizing Returns
Here are some steps that will help you maximize your returns through deductions and credit.
- Maintain a record of your documents, including tax forms, to claim potential deductions.
- You can use a tax calculator from a trusted platform like Beem to estimate your tax liability.
- Check if you can claim any itemized reductions in your taxes.
- Consult with a professional to check if you can get any credits or deductions.
Electronic Vs. Paper Filing: The Best Way To Submit Your Tax Return
If you are still deciding whether to file your returns electronically or via mail, you must understand both options’ pros and cons.
E-filing
- Electronic filing is faster than paper filing, so you will likely get faster returns using this method.
- You can get accuracy with calculations and reduce errors with e-filing.
- You get a secured channel to submit the required information and eliminate the theft risk.
- Electronic return filing is more convenient and takes less time.
- You will get multiple payment options with this method.
However, Electronic filing has its disadvantages. Technical issues can lead to form submission delays. Further, you must maintain a digital record copy for reference, which can be complex for some people.
Paper Filing
- You do not have to pay any software costs with paper filing.
- Further, some people prefer paper filing over e-filing due to personal comfort.
You are entering a process where slow processing will lead to refund delays. Manual calculations may also lead to errors and penalties. This method may also cause security issues and inconveniences. The tax return time is also delayed.
What Happens After You File Your Tax Return?
A simple process executes after you file your return. If you have filed your return electronically, the IRS will process your return within a few weeks. They can verify your information, calculate return value, and request further data. You can check the status of your return online through the IRS website. You may receive a notice if you owe taxes to the government.
Amending Your Tax Return
Mistakes are common while filing taxes. You should fill out your form accurately and double-check before submission. However, here are a few steps describing how to amend your tax return.
- Gather all necessary documentation of your original tax return, even the ones with errors.
- Locate from 1040-X. This form is for amending tax returns.
- Fill out this form and follow the given instructions.
- File your new amended return electronically if possible to avoid further errors.
- If you cannot use the electronic mode, mail the same to the IRS.
Conclusion
Filing your tax return accurately each year can help you comply with tax regulations and maintain financial transparency. Whether you’re an individual or a business, mastering the tax return process is crucial for financial health and legal adherence. You can prefer filing your return electronically for a quicker response from the IRS. Beem’s tax calculator helps you estimate taxes. Beem will assist you in filing your taxes at the most reasonable price and getting the maximum refund.
