How should you proceed new software programs are

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Unformatted text preview: en numerous tests in high school that are much harder than filing your tax return. How should you proceed? New software programs are available for you to use, or you can complete your tax returns yourself. Even if you use the software, make sure you understand the process behind filing your return. An Overview Let’s look at the big picture of what you will be doing. First, you will identify all the income you earned in a given year. Let’s say this amount is $50,000. Second, you subtract certain dollar items from this $50,000. These items come with different names: exemptions, deductions, adjustments. Third, you end up with a certain dollar amount of taxable income. Let’s say this amount is $40,000. Fourth, you simply consult an IRS tax table to see how much you will pay in taxes based on this taxable income. These simple steps are really all there is to it. It is a matter of a little addition and subtraction and consulting one (fairly simple) tax table. The Step-by-Step Process Now let’s outline the steps in a little more detail. 1. Gather together all your tax documents. They include things such as your W2 statement (a statement you receive from your employer stating how much you earned during the year). 374 Chapter 14 Taxing and Spending 2. Most likely, the first several years you will be able to use Form 1040EZ, which is the simplest form. For example, you can use this form if you earned less than $100,000 during the year, do not plan to claim any dependents (anyone who is dependent upon you for some support), and have interest income of $1,500 or less. If you are unsure of which form to file, go to taxforms. 3. Go to printtaxforms and print off one or two copies of the correct form. 4. Start filling out the form. Take things slowly, line by line. 5. You need to determine your filing status. You must file as one of the following: a single person, head of household, qualifying widow, married filing jointly, or married filing separately. 6. You next claim an exemption for yourself and for any dependents you may have. You cannot claim a personal exemption for yourself if anyone, such as your parents, has claimed you as a dependent. 7. You must state the amount of income you earned in the last year. Your W2 form comes in handy here. It identifies the dollar amount of income you earned working at your job. 8. You may also list certain adjustments to your income. These adjustments include expenses that you incurred over the year (moving expenses, tuition and 14 (364-389) EMC Chap 14 9. 10. 11. 12. 11/18/05 10:58 AM fees deduction, health savings account deductions, and more) that will lower your taxable income and thus reduce the amount of taxes you must pay. You may take the standard deduction (which is something else that will lower your taxable income). The amount of standard deduction you take depends upon your filing status. If you do not take the standard deduction, you may take certain “itemized deductions” instead. Like exemptions, adjustments, and the standard deduction, itemize...
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This document was uploaded on 01/16/2014.

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