As indicated by the Internal Revenue Service or IRS, if you are a U.S. citizen or resident for tax purposes, you are required to file a tax return and pay taxes based on factors such as marital status, income, and whether you are a dependent or not.
But how does the tax filing process work?
Continue reading to learn all about it.
Who Needs to File and Pay Taxes?
Every U.S. citizen or resident for tax purposes who earns income must file an annual tax return based on factors such as:
- The source of income.
- Tax status.
- Marital status.
On the other hand, there are specific circumstances that require a foreign national to file a tax return in the United States, such as earning income from U.S. sources in a fiscal year.
Benefits of Filing Taxes in the United States
- Filing and paying your taxes correctly and within the established deadlines will help you stay in good legal standing in the United States.
- An accurate tax return can make it easier to apply for financial assistance with education expenses.
- If your goal is to obtain a green card, one point in your favor is demonstrating that you have filed and paid your taxes on time and correctly.
- When you file an accurate tax return and pay your taxes on time, you’ll know you are doing the right thing to comply with the law.
- For businesses, there are also various refundable tax credits available.
- Claiming self-employment income on your tax return ensures that it is included in the calculation of your Social Security benefits.
Among many benefits, it’s essential to highlight that by filing your taxes on time and responsibly, you are more likely to avoid interest and penalties.
That’s why this process must be carried out with absolute responsibility, as significant fines could be imposed, and in the case of resident foreigners, filing a false tax return could result in deportation.
How to File a Tax Return?
At the beginning of each year, both companies and workers must calculate their earnings from the previous year, how much tax they owe, and finally send the amount to the government. This process is known as filing a tax return.
To file your tax return, you must first know how much money you earned during the year you are going to report, which includes all income you received in the form of money, property, or material goods.
Knowing this, you must follow these six steps to properly declare your taxes:
1. Gather the Necessary Documents
Usually, employees receive the W-2 form from their employer at the beginning of the year. This is one of the required forms to complete the tax return, as it shows how much money was earned and how much was paid in taxes.
Now, if you are self-employed, you may receive the 1099-NEC form with details about your earnings.
If you are a college student, you will receive the 1098-T form, which shows how much you paid in tuition, as well as any amounts you received in grants or scholarships, to help you calculate deductions and credits related to educational expenses.
2. Determine Marital Status
To determine filing requirements and eligibility for certain credits and the correct tax, it is necessary to determine the individual’s marital status. This is determined based on whether the person is married or not under U.S. law.
3. Decide How to File the Tax Return
There are several options for preparing and filing a tax return, including free tax filing, tax preparation software, online IRS forms, and a tax preparer.
4. Determine the Appropriate Filing Type
According to the tax reform codes, you can determine whether to file an itemized return or a standard deduction. The difference is that the standard deduction is a specific dollar amount that reduces the amount of income on which taxes must be paid, and the standard deduction consists of the basic standard deduction and any additional standard deduction for age.
5. Pay Owed Taxes
If you owe money to the IRS, you will need to pay your taxes. Payment can be made online through the IRS website, and full or partial payments are accepted. Penalties and interest will continue to accrue until you pay the full balance.
6. File the Tax Return
The final step is to file your taxes using online tools and wait for any refund through direct deposit to avoid delays.
You’re Now Ready to File Taxes in the United States
This task is not up for debate, which is why it must be taken with absolute responsibility to avoid legal problems such as fines, deportations, or interest.
If you need assistance with other legal matters or guidance on how to open your company in the USA, you can rely on Rex Legal. Contact us to request our help.
