What Is Tax Season? (No, It’s Not a Real Season)
Chances are you’ve heard a lot about receiving tax checks and tax returns. But if you’re new to the tax world, your first question is probably, “What is tax season”? In this guide, we’ll explain a bit about it.
Continue reading the information below to learn more.
What Is Tax Season?
Tax season is the time of year when taxpayers prepare their monetary statements and receive reports regarding their income from the previous year. The timeframe for tax season is generally January 1st to April 15th each year.
However, for some cases, extensions are allowed until July 15th. If tax returns are submitted after the deadline, the IRS issues late fees and interest charges.
Per the IRS, a taxpayer with a gross income of over $12,000 has to file federal tax taxes. Independent contractors or those referred to as a “non-employee” are required to file a return and pay self-employment taxes on any net income from self-employment that’s over $400
Tax Season Versus Tax Year: What’s the Difference?
A tax year is defined as a 12-month accounting period when most individuals earn their income. During this time, taxpayers track their expenses and pay taxes on the income that was taken from their paychecks.
On the other hand, tax season is only for a specific timeframe when workers file a tax return to report their income.
Some taxpayers choose to file their taxes earlier than usual. Filing early is better because the IRS is less busy at the beginning of the season, which means you could get your refund faster.
Not only that, filing early helps to minimize the risk of identity theft. Tax identity theft happens when a person files a fake tax return in your name. Therefore, filing early minimizes the chance that someone else will file using your social security number or tax ID before you do.
Not to mention, when you file early, you’ll get your refund sooner.
What’s Needed to Prepare Taxes
In order to file your taxes, you’ll need a W-2 from all the employers you worked for during the previous year. This information includes the details of your gross income, as well as the amount of taxes that was withdrawn from your income throughout that year. For entrepreneurs, a 1099 form is used to calculate taxes.
In situations where an individual earns more income than they pay out in taxes, they’ll owe the IRS for that year.
If you need help planning your tax strategy, check out WealthAbility.
Understanding Tax Season
If you’re not familiar with taxes and tax season, the idea of it might be a bit intimidating. However, once you get the hang of it, preparing your taxes becomes easier.
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