Where to find reliable income tax help
Unless you're a tax expert, understanding income tax and how it affects you can be overwhelming. To make sure you're neither overpaying nor underpaying your taxes, it's important to understand the tax process – and to find the federal income tax help you need to ensure you can work through the process accurately.
What is Income Tax?
Income tax is a tax levied on your gross income from ordinary income and capital gains. Ordinary income includes revenue sources such as your wages or salary from an employer, independent income from the provision of services and also stock dividends and investment interest. Capital gain income is typically derived from the sale of an investment property (which is not your primary residence).
There are four main groups of taxpayers that you can fall into: individual, small business, mid-size and large business, and tax-exempt and government agencies.
There are also a few key terms necessary for understanding the income tax system:
- Tax bracket: The level of taxable income you fall into, on which your income tax is calculated.
- Income tax rates: The percentage groups at which your income is taxed. Tax rates include statutory, average, marginal, effective, effective average and effective marginal. Inclusive and exclusive tax rates may also be applied.
- Back taxes: Taxes owing from previous years.
- IRS: The Internal Revenue Service, a Treasury Department bureau responsible for collecting taxes.
- Tax deduction: An expense incurred by you that can be subtracted from your gross income, which will then lower your taxable income.
- Tax exemption: A situation or clause that enables you to avoid paying taxes.
Filing Income Taxes
Nearly everyone has to pay tax, unless their income is extremely low. For proper tax preparation (April 15 is always the deadline), you'll need documents from your employer (or the proper documentation for those who are self-employed) to show how much tax has been withheld from your income. Tax forms can be obtained from most post offices and libraries, or they can be obtained online. You may also fill out the forms online through the IRS website.
Because federal and state income tax information varies from person to person and is highly dependent on your situation, it may be beneficial to find professional tax help. Tax consultants can help you take advantage of tax credits and exemptions that you may not even be aware of. Though there is an initial cost involved in hiring a tax service, it can help lower your taxes and may save you money in the long run.