Tax Return Season is near approaching: What should average taxpayers need to know about it? (Part 2)
In our last publication we have brought to the attention of the general public and the refugee population in particular a considerable number of information they would need to know as we near the tax return filing. The other important information taxpayers would need to be aware of in this second segment of the tax return filing is that average taxpayers need to know their eligible dependents they could claim for refundable and non-refundable tax credits. While the non-refundable tax credits reduce your tax liability up to zero; the refundable credits could reduce your tax liability if there is any tax due, but also and most importantly, if you receive the rest or the whole tax credit depending on your tax liability, as a form of payment.
In addition, it is crucial and even imperative for a taxpayer to determine the correct filing status simply because the filing status can impact the tax benefits you receive, the amount of taxes you pay, and it may even impact your federal tax return in the event you file it. There are five filing statuses, including single filing status, head of household status, married filing jointly status, married filing separately status and qualified window status.
Remember that a taxpayer might have more than one filing status to choose from and in that situation, the best advice would be to choose the one that allows the taxpayer to pay the lowest taxes. For instance, married individuals may have more than one filing status including married filing jointly status and married filing separated status. The best filing status that would provide more tax benefits for both individuals is obviously the married filing jointly status.
Moreover, keep in mind that as a taxpayer who files for tax return, you usually have a choice whether to itemize deductions or take the standard deduction, which is a prefixed amount by the government based on your filing status. In fact, when it comes to choice, you don’t want anybody else even the government to pick and decide which one fits your situation better without having a say because in most cases, they might not have your best interest first in their mind instead, they might pick one choice which is easy and convenient for them. So, the best advice is to do your homework to figure out which option allows you to pay the lowest amount possible to get in turn the most benefit.
The easy way to find the best option to select is as follows: first of all, your standard deduction amount is predetermined by the government, but to calculate your itemized deductions amount, you need to add up all of the eligible deductible expenses you paid during the year such as home mortgage interest, vacation home mortgage interest if you have one, state and local income taxes, real estate and personal income taxes, gifts to eligible charities organizations, casualty or theft losses, unreimbursed medical expenses and unreimbursed employee business expenses; then if the total amount of these deductible expenses is greater than the standard deduction amount, your best choice would be itemizing deduction.
Also, you always need to keep the records of eligible deductible expenses you incurred at least for the past three years in case the government decides to audit and verify your claims.
Lastly but not least, as I mentioned earlier at the beginning of this article, the U.S. tax code is too complicated and there is so much tax information that cannot be covered in one article, not to mention new tax laws often enacted by the Congress to adapt to new social or economic changes. Consequently, the taxpayers should continuously educate themselves about tax obligations and benefits can seek advices from certified tax professionals and tax experts to learn more about their fiscal rights and obligations.