A tax return can be defined as an annual summary provided to the IRS containing certain information about the taxpayer. This information refers to the expenses, income, and other pertinent information related to the specific individual.
The information is utilized to determine tax liability and will help to establish whether or not a refund is due or a payment needs to be made.
These tax returns are not only filed with the IRS, but also with the local and state tax collection agencies. Deadlines are published, indicating when these need to be complied with.
Unpacking the annual IRS tax period
A variety of forms are utilized in order for these returns to be filed. For example, Form 1065 is utilized by partnerships, Form 1040 or Form 1040-SR is utilized by individual filers, and corporations would make use of Form 1120 for their tax returns.
Various 1099 forms are utilized when reporting is done for non-employment-related sources. Extensions on returns can be requested on Form 4868.
The tax return itself is divided into three different sections. The portion related to income is used to list all sources of income. The W-2 form is usually utilized for this type of reporting.
Dividends, self-employment income, wages, and your capital gains need to be reported to the tax authority. Tax deductions reduce a tax liability. These deductions are variable according to the jurisdiction. This includes retirement plan payments, etc.
What is the influence of the tax credit system?
Tax credits are also variable, dependent on jurisdiction. These credits refer to the amounts that are offset against the taxes owed or the tax liabilities. There are tax credits that can be attributed to the care of a dependent child, disabled individuals, or individuals who are aged 65 years or older. It is important to remember that restrictions or income limits may apply to these credits.
The Child Tax Credit, in particular, is one of those credits that is used to reduce tax liability. This credit offers an amount of up to $2,000 per child if the child is under the age of 17 years. If the overall tax liability is then lower than the credit amount, an individual may also qualify for the ACTC. The ACTC or Additional Child Tax Credit is refundable up to an amount of $1,700 per child.
An erroneous approach to the IRS tax forms
To be able to claim this full benefit, an income requirement of less than $200,000 has been set for single filers and $400,000 for joint filers. The credit phases out for any income beyond this threshold. No Additional Child Tax Credit refunds will be made before the middle of February. Further delays may be experienced, especially if there are mistakes on the tax returns.
To help avoid problems, it is important to understand the eligibility criteria. Utilizing proper tax software or making use of the services of a certified tax preparer can also help to ensure proper eligibility. According to the IRS’s policy on the Additional Child Tax Credit, the eligibility criteria to claim are:
- A valid Social Security number.
- Be below the age of 17 years by the end of the tax year.
- Not file their tax return, claiming any personal exemption.
- Be dependent and live with you for a period that exceeds 6 months.
Ensure that filing is only done once a Social Security Number has been obtained for the child. This usually takes place within one to six weeks after the child has been born.
Any returns filed without an SSN will be rejected. Another very important matter is to ensure that all required documentation is available.
Rather wait until everything is on hand than file with incomplete or incorrect information, as this can also raise warning signals at the IRS. The Bottom line? Take the time to file a proper return.
