If you are a citizen of the United States or resident of US and meet the IRS’s filling requirements, you have to file income tax return. The US tax returns are due on July 15, 2020. This provides taxpayers an extra 3 months due to COVID 19 pandemic.
Who need to file US tax return?
Keep in mind that not every single person needs to file a tax return but whether you need to file or not depends on your income and filing status. You will need a few vital things in order to file your taxes. Like you will need to know how much money you earned this year. After that you need to decide whether to take standard deduction or itemize your tax return. But you have to submit everything by July 15, 2020.
Step by step guide for filling your US tax return:
- Calculate your income
If you meet certain levels of income during the year, then you have to file a tax return. Those who are employed must look at their pay stub for the year to date income. If you are working more than one job at a time, then you need to ensure to add up your income from all your companies. Must include income from other sources as well like money you earn from rental property, investment or interest.
- Collect all the right paperwork or documents
You should stay on top of the tax related documents and paperwork throughout the year. This is because it will make your life easier during tax filling. Keep receipts for all the things such as work related expenses, medical bills and donations. Apart from this, also keep statements from student loans or investment. This is because having these handy and organized will help you find out whether to itemize and make the process more easy. Remember the internal revenue system recommends keeping records for at least 3 years.
- Wait for your income document
You must receive forms about how much you have earned from your employer and other sources in Jan or Feb. Those who are a full time employee will receive a form W2 detailing your income and which taxes were withheld. Those who work freelance or on a contract basis may receive a form 1099- MISC detailing what you earned. They will also get documents showing dividends or interest earned on their investments or student loan interest they have paid. Those who are college students will receive a Form 1098-T that shows how much you paid in tuition or any amount you received from fellowships and grants to help you find out deductions and credits related to expenses related to education. Keep in mind that you can not file your tax return until you have received a Form W2 or Form 1099 from every place you worked. You will use those documents to fill out a Form 1040.
4.Know your credits and deductions
Try to know which credits and deductions you can take as getting a sense of which deductions and credits you are eligible for will help you to pull the proper paperwork and documentation. A few things you need to consider are mentioned below:
Saver’s credit- individuals who are not a full time student as well as are not being claimed as a dependent person may be eligible for a tax credit if the person contributes to a retirement plan. The amount of your credit depends on the filing status and adjusted gross earnings. If your filling status is single for the year 2020, then you are eligible if your adjusted gross earnings is $32500 or less. Those who are married and are filling their income tax jointly may be eligible if they adjusted gross income is $65000 or less. But these numbers are subject to change in future tax.
Student loan interest- one can deduct up to $2500 in interest payments, depending on his or her modified adjusted gross earnings.
Donations- donating to your favorite charity or NGO? Usually you can deduct those amount if your itemize your taxes. In case you are a self employed person, then you are able to claim deductions for work related expenses like office supplies and industry subscriptions. If you think you are qualify for additional credits or deductions, go through the IRS website.
How to file your tax return?
You have two options when it comes to filling taxes. 1) paper forms and 2) e-file.
- By mailing
If you choose to mail your tax return, you have the option of downloading tax filling form. Now print out the form and sign it. The address where you can send your forms can be easily found on the IRS website. The IRS warns that when you mail in your tax related forms, it can take upto 6 or 8 weeks for your forms to be processed.
- E-file
This is the most preferred approach as it is faster and easier. Also you are less likely to make mistakes when forms are submitted online. If you earn $66000 or less, then you can submit your taxes for free using software programs. The IRS provides a list of such programs that people like you who earned less than $66000 can use to file their taxes for free of cost. Many of these programs let you e-file your taxes at no cost and also allow you to e-file your taxes for free and provided your income does not exceed a certain threshold. Such programs ask you simple and easy questions about your life in order to identify credits and deductions you are eligible for
Where to File your tax return?
Mail your U.S. tax return to:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
USA
If you realize that you should look for help, then hire an expert. But make sure that you work with someone you can trust. This is because you are going to provide a lot of sensitive and important information to that person. So choose an expert carefully.
Ref:
https://bettermoneyhabits.bankofamerica.com/en/taxes-income/how-to-file-your-taxes-in-your-20s
https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad