With the current economy and increasing prices, many people are focusing on discovering multiple sources of income. Especially when earning income from more than one source, it is important to be sure that enough money is put aside to pay income taxes. Unless total annual income falls below a certain level (depending on filing status, age, and type of income) income tax returns must be filed every year. The process of calculating income taxes can be tedious. However, multiple resources are available to provide tax help to calculate and file income tax returns.
A multitude of tax laws exist regarding taxable income and the tax credits and deductions that may reduce the total taxable income. Because of this, many people have found that it is to their advantage to seek tax help instead of attempting to file their taxes completely on their own. You can estimate your income tax through the following method:
- First, add up your total annual income from all sources, including all employment, business, investments, rentals and any other sources. This is your gross income, which can be adjusted by such things as contributions to a retirement account.
- The taxable income can be further reduced through tax deductions. For example, business owners should keep track of all business expenses as they can be deducted. Individuals are allowed deductions for certain personal expenses, as well as a flat amount as a personal exemption.
- Subtract all applicable tax deductions and exemptions from your gross annual income to determine taxable income.
- Multiply your taxable income by your federal income tax rate. This can be found at IRS.gov and depends on your income and filing status.
Tax help, including filling income tax returns, can be found through many sources. If the IRS determines your income taxes were filled incorrectly and they are now demanding additional payment, it is best to seek tax help from an experienced tax attorney who will negotiate with the IRS on your behalf for a satisfactory outcome.