Howdy Wall St. Willy! Some time ago we talked about income tax and you said that income tax is paid based on the amount of money that you earn.
But how does the government know how much I have earned and how much income tax I need to pay?
The government knows that because you need to file an income tax return every year.
What’s an income tax return?
An income tax return is the name given to various forms that you can use to inform the government about your income and taxes. The most common is 1040.
What information is captured on the income tax return?
Some of the information that’s captured on the income tax return is the income that you’ve earned, any investments that you’ve made like your 401K or IRA, any donations you’ve made and other things like that. It also contains the tax that you need to pay calculated based on that information.
Also, the amount of tax you’ve already paid through payroll withholding etc., is covered and any remaining tax you have to pay or the refund that you’d receive from the government if you’ve paid more than you need to.
How do I receive a refund from the government?
Well, how do you file an income tax return?
You can fill out the income tax return yourself, use software like Turbo Tax, get help from tax filing services like H&R Block or through a CPA. It is usually filed electronically online.
Well, is there a deadline for filing the income tax return?
The deadline is usually April 15th of every year. For e.g., the income tax return for 2018 needs to be filed by April 15th 2019.
Does everyone need to file income tax return?
If your income is less than a certain amount, you don’t have to file an income tax return. This amount changes depending on factors like your age and filing status.
Well, is there a specific department within the government that deals with income tax?
Yes, the department within the government that deals with income tax is the Internal Revenue Service or the IRS as it is more commonly referred to.
Well, what if I need help with preparing and filing an income tax return?
Companies that provide income tax return filing services also help with questions related to your returns.
The IRS also has a 24/7 toll free number to help answer your questions. This number is 1-800-829-1040.
Thank you very much for telling me about an income tax return, Wall St. Willy.
You are welcome, Sooper Cooper. Remember, Finance is Your Friend!