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<\/a><\/p>\nExemptions<\/h2>\n
The number of exemptions determines the amount of income you deduct based on your household size.\u00a0 This will be used on page 2.<\/p>\n
The first section’s purpose is to report all your income, by income source.\u00a0 The source of income determines the type of income it is (i.e. ordinary income vs. passive income).\u00a0 As you can see, most of these lines derive their value from the related schedules, or what I\u2019m referring to in this series, as the “ABC’s”.\u00a0 I will be covering each schedule in more depth in future blog posts so be sure to subscribe to my feed or my newsletter.<\/p>\n There are a few legislative adjustments to income that directly reduce your taxable income before arriving at the Adjusted Gross Income (AGI).\u00a0 This number is very important and another essential value that determines quite a few of the tax calculations and assessments.\u00a0 Tax time is the only time of year, you want this number to be low! \ud83d\ude42<\/p>\n Starting with your AGI on page two, take deductions and exemptions to calculate your taxable income. Your taxable income is the number that determines your tax bracket (percent of income).\u00a0 You then arrive at your basic income tax.\u00a0 However, this is not your total tax yet!\u00a0 As you can see on lines 44 \u2013 47 below, there are some taxes with different tax brackets, so those get added.<\/p>\n Although you’ve arrived at line 47, this is not your total tax yet either!\u00a0 Let\u2019s talk credits. Credits reduce taxes (which is the amount you are assessed by the IRS) whereas adjustments, deductions and exemptions only reduce the taxable income.\u00a0 Almost always, credits are better than deductions. But, not all credits are created equal :).\u00a0 These first set of credits are non-refundable credits, meaning they can only reduce your tax to zero, and in most cases, will not carry forward to future tax years.<\/p>\n There are some types of taxes that cannot be reduced through tax credits, so there is a special section just for those calculations and additions to finally arrive at your Total Tax.<\/p>\n While Total Tax is the amount you owe the IRS for any given tax year, payments you have already made throughout the year and tax credits that you are able to claim can further reduce that number! This next section is called Payments, but the majority of entries relate to refundable tax credits.\u00a0 That means these credits can be fully taken, even if it results in a tax refund.<\/p>\n <\/p>\n One last item that I think it is critical for a taxpayer to know and understand is that having a tax preparer does not alleviate you from the responsibility of what is entered on the tax return. See the perjury statement just above your signature!<\/p>\n So when I point this out to my clients, I am often asked, \u201cthen why should I pay someone to prepare my returns if I am still fully responsible?\u201d This is a very logical and fiscally responsible question, especially if your tax preparation fees are high.\u00a0 Yes, high, is a subjective term.\u00a0 I did this on purpose because more than just the price of the return needs to be considered when determining the value of your tax preparer.\u00a0 In fact, the IRS has prepared YouTube videos<\/a><\/em><\/strong> and Podcasts<\/a><\/em> <\/strong>exclusively on this topic, so I am not going to cover them all again here.<\/p>\n What I will stress is that the responsibility of a tax preparer is to interview you and review your tax documents thoroughly to understand your taxable situation as described in the above information.\u00a0 Then, he or she must accurately reflect that information, and be able to explain that information to you, as their client, until you can confidently sign as the taxpayer!<\/p>\n Professional tax preparers are registered with the IRS, the State Board of Accountancy or State Bar Association.\u00a0 They undergo rigorous testing and comply with continuing education requirements to stay abreast of current tax law and strategies.\u00a0 If they are reported or caught preparing returns unlawfully or even unethically, there are separate preparer penalties depending on the extent of the infraction.\u00a0 If you prepare yourself, or use an unregistered tax preparer, all the penalties and interest for errors are your responsibility regardless of whether the error was an honest mistake or fraud.<\/p>\n For a student or first job taxpayer, this risk is probably negligible or minimal, so the fee should also be (see https:\/\/www.irs.gov\/uac\/Free-File:-Do-Your-Federal-Taxes-for-Free<\/a><\/em>)<\/strong>.\u00a0 For taxpayers with more complicated returns, the risk is significantly higher, and the amount of time and professional knowledge and skill to prepare the return also increases.<\/p>\n This post should give you a good overview of the 1040 form itself. \u00a0In future posts I will be covering each of the 1040 schedules in more depth. \u00a0However, if this post didn’t answer all of your questions or if you have questions unrelated to the 1040 please feel free to contact me using the information in the footer of this page! \u00a0You may also schedule a free consultation to discuss and ask questions specific to your tax situation. \u00a0I look forward to hearing from you.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Tax season is coming. In a scant two months it will be here and for some, it will arrive bringing stress and confusion. As a tax preparer my goal is to minimize those feelings of confusion and anxiety in my clients by providing them clear and accurate information, fighting for their taxpayer rights, and lawfully […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-963","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/posts\/963","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/comments?post=963"}],"version-history":[{"count":1,"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/posts\/963\/revisions"}],"predecessor-version":[{"id":971,"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/posts\/963\/revisions\/971"}],"wp:attachment":[{"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/media?parent=963"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/categories?post=963"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/demolink.site\/trudystaxes\/wp-json\/wp\/v2\/tags?post=963"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}<\/a><\/p>\nIncome<\/h2>\n
<\/a><\/p>\nAdjusted Gross Income<\/h2>\n
<\/a><\/p>\nTax and Credits<\/h2>\n
<\/a><\/p>\n<\/a><\/p>\nOther Taxes<\/h2>\n
<\/a><\/p>\nPayments and Credits<\/h2>\n
<\/a><\/p>\nSignature and Responsibility<\/h2>\n
<\/a><\/p>\n<\/a>Trudy Hetzel is a licensed Enrolled Agent<\/a><\/em><\/strong>. She\u00a0has owned and operated her business in Surprise, Arizona for 15 years and has over 20 years of accounting, bookkeeping and tax preparation experience. \u00a0She’s a married mom with two awesome kids and three awesome dogs. \u00a0Trudy loves helping people with their tax, accounting, and bookkeeping needs. \u00a0Give her a call today!<\/p>\n