How to Calculate Income Tax Returns?

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No matter what you do for a living or how much money you make, you need to file your taxes accurately and on time. Missing the tax deadline, or not filing at all, can invite unwanted attention from the IRS. Fortunately, figuring out your income taxes is not as difficult as you might think. While complicated returns might require the help of a CPA or tax accountant, chances are you can do a simple return on your own.

Keep all of your tax records in an envelope or file folder. At the beginning of the year, you will begin receiving the forms you need to do your taxes for the previous year, including a W2 form from your employer and a 1099 form from your bank. Gather these items as they come and keep them in a safe place until you are certain you have all of your paperwork.

Download a copy of form 1040EZ, 1040A and 1040 from the IRS website, or pick one up at your local library or legislative office. Read the instructions carefully to determine which form you should use. If your income consists of only wages and a small amount of interest, you can probably use the simple one page 1040EZ form.

Enter your name, address and Social Security number on the 1040 form. Hand print or type your name to make it easier to read. Be sure to include your Social Security number, and double-check to make sure it is correct. If your Social Security number is not correct, the IRS will be unable to process your return.

Enter the wage information from your W2 form. If you held more than one job, enter all of the W2s you received. Enter the employer ID number and the amount of compensation from each W2.

Enter the amount of interest you received from your bank. This information is reported on form 1099-INT, and you will receive one of these forms from each account on which you earned interest during the previous year.

Enter any additional income, including capital gains, dividend income, self-employment income and capital gains, on the appropriate lines of the 1040 or 1040A form. If you have these types of income, you will not be able to use form 1040EZ.

Review the amount of your standard deduction and decide whether it benefits you to itemize deductions instead. If you have a large amount of deductions, including mortgage interest, property taxes and local taxes, it might be beneficial to itemize your deductions.

Deduct the amount allowed for the number of deductions you claimed. Typically you can claim a child as a dependent if that child relies on you for his or her care.

Subtract your deductions from your income to determine your taxable income. Use the tax table in the 1040 booklet or on the IRS website to determine the amount of tax you owe.

Compare the amount you owe in taxes to the amount already paid through payroll deductions and other payments. If the amount paid is more than what you owe, you are entitled to a refund.

Mail the completed tax return to the address shown on the form. The address you use depends on the state in which you live. Be sure to keep copies of your return and supporting documents for your records.


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