Your Income Tax Return is More than Just 1, 2, 3… Your Income Tax Return is also A, B, C, D… When you start your tax return, after the heading with your name, address, Social Security Number you will eventually get to the lines that allow you to voluntarily report your income. Ours is called a voluntary system because you voluntarily report your different sources of income. In other countries the government has an agreement with employers to withhold their required taxes. Our voluntary system does not allow you to decide to file one year and not file another year. It is not that kind of voluntary. AND if you decide not to voluntarily report your total income, ALL of your income, the Internal Revenue Service has it’s own ways of determining you have been less than totally truthful. Page one of your 1040 Income Tax Return shows gross wages, interest and dividend income, net business profits and other sources of income. Your net business profits come from Schedule C – another form! Your interest and dividend income come from Schedule B – another form! Page two of your 1040 Income Tax Return has a space, a line, for you to report your total itemized deductions. Finding your total itemized deductions takes work, but it can be worth it in saving you tax! There are several categories of itemized deductions. They are reported on Schedule A – ANOTHER FORM! Unless you are filing a 1040 EZ, the simplest of income tax returns, you will have more than one page to your tax return, more forms before you are finished. And when your tax preparer asks you questions, it is not because they are nosy (maybe they are nosy) but they want to find every tax benefit for you. Yes, a good preparer will charge you for saving you money, but I hope you believe that paying that tax preparer to help you pay your lowest legal tax is a very good investment. Schedule A, Itemized Deductions is not for everybody. The biggest deduction is usually interest paid on a home mortgage. If you do not own your own home you may not be itemizing. But the government has special gift for you. You do not have to do anything extra to take advantage of this tax saving gift. That gift is called the Standard Deduction. The amount varies depending on your filing status (see my blog on filing status here) and it can also change year-by-year depending on what laws our Congress pass. If you thought the Internal Revenue Service made the laws, you are mistaken. It is Congress that makes the laws. It is the job of the IRS to interpret the laws and design the forms to properly implement the laws. It is YOUR job to understand the laws and file a correct tax return. And that is where your trusted advisor, someone like me, comes in to help you file a correct and accurate return. If you engage the services of someone like me, we help you pay your fair share, your lowest legal tax, and not a penny more. With the advent of the RTRP, Registered Tax Return Preparer, everyone who is paid to prepare a tax return MUST take the required number of education hours each year and annually report their hours to the IRS in order to stay in business. RTRP is the entry level tax return preparer. The designation was years in the making and came about to protect YOU, the public, from unscrupulous tax return preparers. You’d be surprised at how much tax fraud is committed by people pretending to want to help you and take your money. The last part of page two is where you SIGN your tax return. You need to know that when you sign your tax return you do so under the penalty of perjury. You are attesting that yours is an accurate return. Did you know you are swearing under oath that you have reported all of your income? Did you know you are swearing under oath that you are taking the deductions you are entitled to according to the law? Did you know you are swearing under oath that you can verify all the numbers on your return if asked to do so? That is why keeping records (see my blog on record keeping) is so very important. And you can swear all you want about keeping your logs, keeping your receipts, but you’ll be swearing up a storm if you don’t have them when the IRS comes calling. 🙁 Did you know there are two or three signatures on every return? You sign. If you are married filing jointly, your spouse signs. And your preparer signs. We all sign under penalty of perjury. It is my job, as your preparer, to ask you the questions that support our (and I say our because your return is our joint effort) tax return entries. I can’t answer for anyone but myself, but I will tell you, you cannot pay me enough to knowingly lie for you on your tax return. The penalties are severe. Oh, my, I can carry on. Watch for my next blog where I begin talking about medical deductions, the very first section on Schedule A.   To your lowest legal tax, Nellie Williams, EA Bullet Proof Your Taxes   Image: FreeDigitalPhotos.net