US yearly tax returnsThe United States Congress, which serves as the nation's legislative branch, is responsible for writing the Internal Revenue Code (IRC).
The IRC which is basically the 'tax code' provides the framework for all aspects of the tax system, including tax collection, tax enforcement, and the administration of tax credits, rebates, and refunds.
These responsibilities are within the purview of the Internal Revenue Service (IRS), which is part of the United States Department of the Treasury.
Since all Americans with incomes over a particular threshold are required to pay federal income taxes, and every citizen that earns an income is obligated to file a return, it's useful to have a working knowledge of these regulations.
US income tax is progressive, meaning that higher earners contribute a larger share of their income to the government.
Theoretically, the percentage you pay increases as your income rises.
The system is set up in this manner so that individuals who have more disposable income may contribute more.
The financial year in the US runs from the 1st of October to the 30th of September.
The combination of all income, including wages, property, sales, capital gains, dividends, imports, estates, and gifts are all subject to taxation over the course of the fiscal year, sometimes in addition to other fees.
Are you an independent contractor or employee for tax purposes?To determine the answer to this question, you might ask yourself three questions:
- Does the company or business control what you do at work and how you do it, or does it have the right to do so?
- Is the company that pays you in charge of the business parts of your job? Things such as how you're paid, whether or not your expenses are covered, who provides tools and supplies, etc. are all relevant.
- Are there written contracts or employee-type benefits, like a pension plan, insurance, or vacation pay for example?
What forms do you need to know about?There are all sorts of specific forms to file for individual employees, independent contractors, business owners, and corporations for example.
The majority of people will fill out a 1040 form as individual employees, but as a business owner it's important to have an understanding of the form 1096 and the seven forms that follow under it: 1097, 1098, 1099, 3921, 3922, 5498, and W-2G.
We'll cover it briefly here, but you can read these detailed tax form 1096 instructions if it's relevant to you.
Business owners who want to submit any of the above seven types of information return to the IRS by regular mail must utilize form 1096.
It's basically a summary of the other forms and is unnecessary if you file your information returns electronically.
Here's how to fill out a 1096 form:
- Input your business's name, address, and contact information.
- Fill in your Social Security number in box 1, use your EIN number instead if need be.
- In box 3, enter the number of 1096s you're sending. They must be identical.
- In box 4, enter the total federal income tax withheld. If no federal tax was withheld, enter 0.
- In box 5, enter the total reported payments on all forms, such as all 1099-MISC forms.
- Under box 6, mark the form type.
Last thoughtsPaying your taxes correctly and on time is a part of life.
Tax regulations can be difficult to follow but learning some basic laws and concepts will help you understand them better.
Just remember, you're doing your bit to contribute to the upkeep of roads, schools, the military, and social benefits to name a few.
Note: The information in this site is for general guidance only. Users of this site are advised to take professional advice before taking practical tax decisions.
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