If you earn income in America, you’re probably required to give a bit of it to the government. If you’ve been working for years, you’ve got a lot of experience with this. Your parents probably introduced you to taxes the first year you were working, or maybe you heard them talking about it even long before that. But even after years of paying, you might not know what exactly you’re sending.
The Return Itself
The total of all the paperwork that you file with the government is what’s referred to as your tax return. It’s every form you’re required to submit, every piece of paper that is necessary for the government to understand where you stand. These documents show them what you’ve paid, what you owe, and what they might owe you.
Credits Vs. Deductions
Both of these reduce the amount that you owe the government, but in different ways. A credit is a direct reduction in how much you need to pay. It’s like receiving a deposit into your checking account: it immediately counts in full against any kind of balance.
Deductions are a different issue. They reduce the amount of income that you can be taxed on, and thus only indirectly lower your liability. For example, if you’re electing to itemize your deductions and you have $10,000 in eligible donations to charity and other deductions, then you’ll be taxed on your total income minus $10,000. Deductions are commonly less favorable for the taxpayer’s ultimate amount owed or refund received because only a portion of their total value is reflected in the final amount. You don’t get to take $10,000 off your taxes; you save the difference between what you would have paid on your full income and what you’re paying on your income minus $10,000.
Different Forms For Different Situations
The main reason that people need assistance from professional tax preparers at companies like Liberty Tax is because not every American will file the same forms. There are several different ways individuals can make money, and each one requires a different form. In addition, various deductions and credits all have their own individual forms. If you don’t know which is which, you could easily end up submitting the wrong thing without knowing it.
You can avoid these issues by seeking out your local Liberty Tax franchise. We have trained preparers standing by, ready to assist our customers no matter what their tax situation. In addition, each Liberty Tax franchise has preparation professionals available to answer tax questions even if you’re not a client. Our goal is to help everyone learn more about those mysterious forms, so stop in today and get clarification on your questions from a friendly face in your neighborhood!