It's almost at the end of the year and the holidays will soon be over. After the bright lights and great food, camaraderie with friends and family, the taxman will soon be gracing your mailbox with the new IRS 1040 Tax Forms. You will likely use these official tax forms to file your 2015 annual income tax return as soon as is reasonably possible. The form will be divided into several sections that will allow you to report your earnings for the year, claim your deductions, and attach any other required forms or schedules with it.
Report Your Income:
The 1040 Tax Forms will usually be several pages long. The first page of the form will be used to calculate your AGI or Adjusted Gross Income. You will need to list all your sources of income in this section. This will include your wages and salary earned, tips, interest, dividends, previous tax refunds, alimony, business income, pensions, IRAs, unemployment, and Social Security benefits received. If you have income from any other sources that are not listed on the form, you can include that in the section marked 'other income'. All income must be reported unless it is considered to be tax-exempt.
Claim Your Deductions:
The next section of the form allows you to claim any deductions you may have. These adjustments could include self-employment tax payments, money paid for alimony, deposits to your IRA account, student loan payments, or any other allowable expenses that you may have had to pay throughout the year. If you're not sure if something you've paid is an allowable deduction, check the attached instruction book that comes with your form or consult a tax preparer for further explanation.
Exemptions:
In the third section of the 1040 Tax Forms you can reduce your tax allowance even further by applying your allowable exemptions. Each person is allowed to claim a standard deduction along with several itemized deductions like mortgage interest, un-reimbursed business expenses, and some allowable medical expenses. If your total of itemized deductions is lower than your standard deduction your taxable income will be lower by using the standard deduction. If it exceeds the standard deduction, your taxable income will be higher. Once you've chosen the best deduction to use, these will be deducted from your income page to determine how much income you need to file taxes on.
While filing your taxes each year is a mandatory requirement for everyone, how you file is an option that is left entirely up to you. Some people have finances that are pretty basic and easy to figure out. For those people, filing a simple 1040EZ form, which is a one-page document, can be done at home in a short amount of time. However, other people have a more complicated tax situation and therefore may need to hire a professional tax preparer or accountant to help them fill out the forms and file their taxes properly. Whatever the case, the forms are coming and soon we'll all be crunching the numbers to figure out exactly how much money we need to pay Uncle Sam.