How to Read and Understand Your Tax Forms 2021
The 2021 tax season is here and this means that the Internal Revenue Service IRS is now officially accepting, approving, and issuing tax refunds for the 2020 tax year. It is expected that as much as over 150 million returns will be filed this year, and taxpayers are expected to read tax form properly in order to understand tax form as it applies to them. So this article shows you some information about the tax form.
Why You Should Read Tax Form Carefully Before Filling It
Filing tax returns is a serious issue and care must be taken in order to avoid mistakes or falling into the wrong hands. For this reason, it is important to read the tax form carefully, read the tax table, and ensure that you have a proper understanding of the tax form. Not reading the tax form properly could put you in danger. Some associated problems include:
1. To Avoid IRS Impersonators:
If you do not read the tax form carefully, it is possible to fall victim to IRS impersonators. It is important to note that during tax seasons, a lot of criminals impersonate IRS and fish for victims. Sometimes, these criminals capitalize on the fact that a lot of people hardly read through the tax forms thoroughly and may trick you into providing your valuable personal information. For instance, during tax seasons, it is not uncommon to receive phone calls, emails from people who claim to be working for the IRS and threaten to arrest you, revoke your license or even get you deported if you do not comply with their demands. Please note that the IRS will not call you to ask for credit or debit card numbers and these are clearly written on tax forms to warn people against impersonators. Note that the IRS will certainly not demand immediate payment or even threaten to bring in law enforcement agents.
2. To Avoid Tax Preparer Phishing:
Even if you intend to use tax professionals and accountants to prepare your tax returns, you still need to read and understand tax forms. There are criminals who act as tax professionals in order to get information from taxpayers. In fact, the aim is to obtain the usernames, passwords, and electronic filing identification numbers after which they impersonate as tax preparers and get the private information of other individual taxpayers. Beware of this trick and do not fall for it.
3. To Identify Bogus Charitable Organization:
It is important to read the tax form properly because this helps you to understand all tax issues that you may come across. For instance, there are illegitimate nonprofit organizations that are designed to swindle people of their money. Check to see that the charities that even look convincing with the IRS and see they are legitimately registered with the IRS as a tax-exempt nonprofit organization. Be sure that any charity organization is eligible to receive tax deductible contributions.
Tips for Understanding Tax Forms
To understand the tax form properly, you also need to know how to read the tax table. For instance, in your W-2 tax form, there are some key box numbers that you must focus on to help you fill your tax form properly. These tips below will help you out in W-2 forms.
Tip No 1: Box 1 is All About Your Taxable Income
Box 1 contains the key number which will help you figure out your taxable income. The box is labeled as "Wages, Tips and Other Compensation". It shows your taxable earnings for the year as well as helps you in tax preparation through some of its features.
Tip 2: Box 2 is What You Have Paid the IRS
There is another key figure on box 2 which will help your tax return. It gives you an idea of what you have already paid the IRS. This includes the amount already withheld over the year from paychecks. In addition, Box 2 on the tax form also shows you what the refund will be.
Tip 3: Box 12 Shows Nontaxable Benefits
Note that figures from this box do not necessarily go into your tax return. However, it is important to note that it can also help you know what you can get from your employer that is not captured in wages.
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