The process of filing taxes is usually an intricate one. You need to scrutinize your finances from all facets and determine to your best of ability the amount of money you owe in federal taxes or other forms of taxes. To this end, there is an ample amount and variety of tax return calculator on the internet to help those more inclined to calculate their tax returns in a DIY process.
That said, it is always a good idea to consult a professional firm like Vitale & Associates, LLC to help and guide you through the process at the very least. Otherwise, if you have the opportunity, you should let a professional CPA take the lead in calculating your tax return. This may seem like an unnecessary expense but more often than not, it worth it. To appreciate the importance of professional CPA in as far as filing taxes is concerned, you need to first understand what the typical tax return calculator considered in its calculations.
#1. Tax Bracket – Many people confuse this aspect of filing taxes to tax rates. However, they do not mean the same thing and they are, therefore, not interchangeable. Tax brackets are classifications of income ranges. Each bracket has a range income which has a corresponding tax rate from 10% to 39.6%. Generally, the more you earn, the higher the taxes you pay.
#2. Filing Status – The filing status takes into consideration of how much you get back due to family responsibilities. It also affects other tax elements such as tax credits, deductions, and exemptions. In this regard, you can file as married, single, married filing separately, filing jointly, head of household or qualifying widow(er).
#3. Exemption Claims – Exemptions are meant to lower the taxable income on your returns. Some of the claims that you may qualify for include personal exemptions, exemptions for children, exemptions for a spouse.
#4. Adjusted Gross Income – This amount takes into consideration all of your income from all income streams. You should note that the vast majority of income types are eligible for taxation. These include salaries, tips, bonuses, sick pay, vacation pay, commissions, gambling winning, and much more. From this amount, deductions are made to give rise to the Taxable income.
#5. Deductions – Deductions reduce your taxable income and the amount of tax you have to pay. However, claiming the deductions can be done in the standard manner or itemized. Thus, it is important to understand the benefits of each beforehand.
#6. Credits Claims – These are the reductions made on income tax based on what you are eligible for. Tax credits are given under special circumstances.
All these look quite straightforward at first glance. However, the nuances that arise year over years means that the influence of each of these factors on the taxes you owe does change. Therefore, you need a professional eye to help you reduce the tax cost you have to bear. This is something that a tax calculator cannot help you with. Such tools, as effective as they may seem, are only good at estimating your cost of tax but not accurately determining what you should pay. As such, you may end paying more than you should, which is never ideal.
On the other hand, you may end up paying a lesser amount than you should. Keeping in mind that negating to pay your fair share of tax can land you into a great deal of trouble; you should pull all stops to ensure that this does not happen. In this regards adding a human touch after using a tax return calculator is a good way of going about your tax calculations.
Vitale & Associates, LLC is experienced, ready, and willing to help you file the appropriate taxes. Contact us today and add a human touch to your tax return calculator.