Tax Returns

In casual conversation, the term tax return is used rather loosely for two related, but different subjects.  When some people talk about tax returns, they are really talking about filling out a tax form.  Other individuals use the phrase tax return to talk about their refund.  So as not to play favorites, we'll talk about both topics in this article.

Filling out a Tax Return

We tried to come up with a rule of thumb that taxpayers could use to find out if they had to fill out a tax return.  It takes the IRS nearly two pages of instructions to figure this out.  That being said, here are three high-level rules of thumb to help you figure out if you may have to file a tax return in 2011 for money earned in 2010:

• If your gross income was more than $3,650 and you are not claimed as a dependent on another's tax return, then you may have to fill out a return.
• If you are claimed as a dependent on someone else's form and your unearned income was greater than $950, then you might have to file a return.
• If you are claimed as a dependent on someone else's form and your earned income is $5,700 or more, then you might have to file a return.

Gross income is merely the sum of your earned income (such as wages) plus your unearned income (interest income).  Pages 8 and 9 of the form 1040 instructions have a much more detailed approach to figuring this out.  If you are close to these thresholds, then you should take a look at these instructions to see if you need to file a tax return.

If you're a college student and your employer withheld federal income tax, then you may have overpaid, and may be entitled to a tax refund.  Form 1040 EZ is fairly simple to fill out and worth the effort if you're entitled to receive money back from the government.

Tax Return Deadline

If you have to file a return, then the only other issue you need to be concerned with is the tax return deadline.  Here is one rule that the IRS made very simple - tax returns are normally due on April 15th.  (In 2011, April 18th is the actual deadline).  But what happens if you cannot make the April deadline?  You can file for an extension!

Filing for an Income Tax Extension

You're entitled to an automatic six-month extension if you inform the IRS either by phone or by completing a form 4868 no later than April 15th.  This does not mean that you can wait until October 15th to pay any income taxes you owe the government.  The extension only applies to the filing of the tax return itself.  If you owe the government taxes, then they expect to be paid on time.  Interest charges will accrue on any taxes due starting on April 15th.

If you're in the military and on duty outside of the United States, or if you are a civilian that lives outside the United States and your main place of business is outside of the U.S., then  you may qualify for an automatic two-month filing extension without filing a form 4868.

Form 1040

Now that you've figured out if you have to file, and when you have to file a return, the next logical question is:  What form do I have to file?  The IRS is extremely sensitive to the time it takes to fill out tax forms.  As a matter of fact, the tax instructions usually contain an estimate of the time necessary to fill out each form.

The rule of thumb for form 1040 is to keep it simple.  Unless you think that you are entitled to certain tax deductions, then you want to use the shortest form possible.  The three possibilities include:

Form 1040EZ

The easiest of the three tax returns to complete is the Form 1040EZ.  This is the form most college students or summer help would typically file with the IRS.  If you have interest income that is less than $1,500, zero dependents, taxable income less than $100,000 and you are under the age of 65, then this is probably the best form for you.

Form 1040A

The Form 1040A is a little more detailed than Form 1040EZ.  You can claim deductions for student loan interest expenses, IRA contributions, and some higher education expenses.  You can also claim a tax credit for items such as childcare, earned income, and education.

You cannot itemize deductions with this form and your taxable income must be less than $100,000.  You can have a capital gain distribution, but you cannot claim a capital gain and loss.  If the forms 1040EZ or 1040A are not suited to your situation, then your tax return should be filled out using the Form 1040, also known as the long form.

Tax Refunds

After you've filled out your tax return, you either have good news or bad. The bad news is when you have to write out a check to the IRS because you owe taxes.  The good news is when you're entitled to a tax refund.  This leads us to a final tip for tax returns:

Consider filling out your tax forms as early as possible after the first of the year.  Even if this is just an estimate, you should try to get an idea if you owe money or you are entitled to a refund.

If you think that you're getting a refund, then fill out your tax return as soon as possible.  This way you get your tax refund sooner.  If you think you are going to owe additional income taxes, then you may want to wait until you're closer to the April 15th deadline before sending in your return.

In the good old days, the earlier you filed, the faster you would get your return.  Today's age of electronic tax filing has really changed all that.  You can opt for electronic funds transferred directly into your bank account or get a check in the mail.

Tax Refund Status

The best innovation we've seen from the IRS in recent years is their system that allows you to check on the status of your tax refund.  You can find out exactly where your refund is simply by visiting the IRS website.  The only information you need is your Social Security number, filing status, and the refund amount.

About the Author - Tax Returns

Copyright © 2005 - 2011 Money-Zine.com