So you’re ready to start planning your financial future. But before you dive into the nitty-gritty, you might want to consider your current tax situation. In the United States, there are seven official taxation rates. But depending on where you live, your income tax circumstances can change.
Even if you’re not currently under the IRS microscope, it’s always a good idea to check how much money you pay in taxes now and how that could change over time.
Let’s look at some of the most important things you might not know about income tax.
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You Don’t Need to Complete Your Full Tax Return to Get a Good Estimate of What You’ll Own in Income Tax
Income tax filings can seem a bit overwhelming, so it’s important to remember that you don’t need to fill out every detail of your return. You can usually choose to pay any balance on your income tax return and enter “none” on your federal income tax return. Then, when you’re preparing your returns, you can simply focus on the big picture.
This is especially important if you have doubts about the amount of your tax burden. If you’re unsure how much income you’ll owe, you can always call your tax advisor or use a free income tax calculator to get a ballpark figure. Your advisor can also help you estimate your tax savings if you’re interested in taking that approach.
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You May Not Have to File a Federal Income Tax Return
Some people find it difficult to understand why they’re required to file a tax return. After all, they’re required to file forms and documents related to IRS audits, right? You don’t have to file a tax return if you don’t owe taxes. And depending on where you live, you may not need to file a state tax return.
For example, if you’re a non-citizen living in the United States, you don’t have to file a state income tax return either. This is the case regardless of your income and whether you live in a state that imposes a state income tax. On the other hand, if you’re a U.S. citizen living abroad and make less than $100,000 per year, you must file a state income tax return.
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You Don’t Need to Itemize to Take Advantage of Certain Deductions Like the Student Loan Interest Deduction
You don’t need to itemize to take advantage of these deductions. In fact, you could end up paying more in taxes as a result. You can take advantage of many different types of deductions and credits, but one of the most important is the student loan interest deduction.
If you make a significant amount of money working as a contractor or an independent contractor, you may be able to take the full deduction even if you don’t owe any taxes on that income.
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You Should File a Return Even If You Can’t Pay Your Tax Bill
The reason you should file a tax return is so that you can get a better understanding of your current tax situation. This is particularly important if you’re unaware of your current tax burden or think you might owe tax.
You can also use a tax return to set and improve your tax-planning strategy. If you find yourself in a position where you won’t be able to pay your tax bill in full, it’s a good idea to file a tax return even if you don’t owe anything. This will better understand your current tax situation and help you create a tax-planning strategy that works best for you.
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Due dates matter
There are several gaps in the tax laws that allow people to get away with past-due taxes. The due date for federal and most state taxes is usually the same as your income tax return. However, there are a few exceptions.
If you’re under audit, you may be able to file a late tax return. And if you miss the deadline by 30 days or more, you can ask a tax professional to file a tax return. In addition, depending on where you live, you may be able to clear your tax bill by paying it in full or agreeing to reduced taxes in exchange for filing a lower tax return.
The income tax is a complex tax that may seem complex on the surface but is quite simple once you understand its purpose. The income tax is a way for the government to raise money, and people need to understand the different rates, deductions, and credits available to them.
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