5 Must-Knows About Filing Your Personal Income Taxes
1. What is taxable income?
This includes wages, salaries, tips, commissions, business income, rents, dividends, alimony, capital gains, IRA distributions, unemployment benefits, and Social Security benefits. 2. What kind of deductions am I allowed to take?
Tax deductions are adjustments to an individual's taxable income. For every dollar of deductions that an individual has, the amount of income the government levies taxes on decreases by a dollar. A taxpayer can take the standard deduction or itemize deductions. See our blog on the types of deductions you are allowed to take.
3. What are tax credits?
Tax credits reduce an individual's tax liability dollar for dollar. Common credits include the earned income credit, first-time home buyer credit, child and dependent care credit, adoption credit, Hope and Lifetime Learning credit, credit for the elderly and disabled, and retirement savings contributions credit. 4. Do I file my tax return if I am living in another country?
U.S. citizens working abroad must still file U.S. tax returns and pay U.S. taxes.
5. What may cause the IRS to audit me?
Self-employed individuals are more likely to be audited because they have more opportunities to lie about their income and business and personal expenses.
Contact Landmark Tax Service if you have any questions.