What You Should Know About Tax Preparation And Tax Filing
The second specialized area of accounting is income taxation
. Preparing an taxes return by filling out one or more forms entails collecting information and presenting data in a coherent manner; therefore, both individuals and businesses frequently hire accountants to determine their taxes. Tax rules, however, are not identical with accounting practices.
Tax regulations are based on laws that are enacted by legislative bodies, interpreted by the courts, and enforced by designated administrative bodies. Much of the information required in calculating taxable income and the amount of tax due, however, is also needed in accounting, and many techniques of computing are common to both areas.
In the United States, Canada, and many other countries, people must calculate and report to the government their income and tax liability, (amount owed in taxes). Individuals and families in the United States generally determine their federal income tax liability in four major steps.
(1)They first calculate their adjusted gross income, which equals total income minus losses and certain nontaxable income.
(2)They take allowable exemptions and deductions from adjusted gross income to arrive at a figure of taxable income.
(3)They consult a tax table (table that shows how much tax is owed for different amounts of income earned) or a rate schedule (list of tax rates for different levels of income) to find their preliminary tax liability based on taxable income.
(4) They subtract taxes paid during the year and any allowable tax credits to arrive at the amount they must pay the government.
Most U.S. tax payers use IRS Form 1040 to compute their tax liability. People with simpler finances can use a modified version of the 1040 form that requires fewer calculations. People with complex finances use additional forms to make calculations on income, deductions, or credits that are not included on the main 1040 form. Today, most people use the aid of Quick Books consulting which simplifies and hastens the entire process of tax preparation and even bookkeeping.
Tax preparation is no easy matter. Most people need the help of accountants and certified public accountant firms to get their forms together. Tax preparation can be less of a hassle if you do regular (monthly) bookkeeping. Bookkeeping keeps track of all your financial transactions such as payrolls and net sales. A well-organized book makes it a lot easier for accountants to do your taxes when the season comes.
Late filing of taxes is a lot more acceptable than failing to file for one. The IRS might see this as an evasion of your obligations so make sure you do your tax preparation on time or in advance. The key is to keep your books organized on a monthly basis (probably through Quick Books consulting or a certified public accountant firm). Gather all your financial transaction documents, from receipts to payroll records and out them in the books. Note that tax evasion and tax avoidance are two different offenses. Tax avoidance is the legal utilization of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. The latter is the general term for efforts to not pay taxes by illegal means. Either way, it can get you into a lot of trouble with the IRS s best keep your tax records in top shape.
HC Tax and Accounting provides tax preparation services as well as accounting and bookkeeping. Consult with them and free yourself of the troubles of tax season.
by: Businesslocallistings
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