14.

WELL PLANNED, REALISTIC, FLEXIBLE, CLEARLY COMMUNICATED

FILING YOUR FEDERAL INCOME TAX RETURN

WHO MUST FILE?

 The amount is based on the person’s filing status and other factors such as age. The amount at
which you are required to file will change each year based on changes in the standard deduction
and in the allowed personal exemptions. If your gross income is less than this amount but taxes
were withheld from your earnings, you will need to file a return to obtain a refund.

Your filing status is affected by such factors as marital status and dependents. The five filing status
categories are as follows:

 Single
 Married, filing joint return
 Married, filing separate returns
 Head of household
 Qualifying widow or widower

WHICH TAX FORM SHOULD U USE?

 Your decision in this matter will depend on your type of income, the amount of your income, the
number of your deductions, and the complexity of your tax situation.

About 20% taxpayers uses FORM 1040EZ / FORM 1040A

About 60% uses REGULAR FORM 1040

 Most tax preparation software programs will guide you in selecting the appropriate 1040 form.

COMPLETING THE FEDERAL INCOME TAX RETURN

Major sections of FORM 1040

1. Filing status and exemptions

2. Income
3. Adjustments to income
4. Tax computation
5. Tax credits
6. Other taxes
7. Payments.
8. Refund or amount you owe
9. Your signature
FILING STATE INCOME TAX RETURNS

 In most states, the tax rate ranges from 1 to 10 percent and is based on some aspect of your
federal income tax return, such as adjusted gross income or taxable income. States usually
require income tax returns to be filed when the federal income tax return is due.

TAX ASSISTANCE AND THE AUDIT PROCESS

IRS SERVICES:

 Publications
 Phone hot line
 Automated tax kiosks
 Recorded messages
 Walk-in service
 DVD

TAX PUBLICATIONS - Each year, several tax guides are published and offered for sale.

THE INTERNET - As with other personal finance topics, extensive information may be found on the
Internet

TAX PREPARATION SOFTWARE

When selecting tax software, consider the following factors:

1. Personal situation

2. Types of income, unusual deductions, and various tax credits

3. Technical aspects

TAX PREPARATION SERVICES

• Tax services range from local, one-person operations to national firms

• Enrolled agents—government-approved tax experts
• Accountants offer tax assistance
• Attorney’s services

EVALUATING TAX SERVICES

When planning to use a tax preparation service, consider these factors:

• What training and experience does the tax professional possess?

 • How will the fee be determined?
• Does the preparer suggest you report various deductions that might be questioned
• Will the preparer represent you if your return is audited?
• Is tax preparation the main business activity, or does it serve as a front for selling other financial
products and services?

TAX SERVICE WARNINGS

 Even if you hire a professional tax preparer, you are responsible for supplying accurate and
complete information.
 Hiring a tax preparer will not guarantee that you pay the correct amount
 Beware of tax preparers and other businesses that offer your refund in advance

TYPES OF AUDITS