Income Tax Help

Income Tax Help

Income Tax Help
There are many websites on​ the​ Internet today that gives much needed income tax help for those who have no idea of​ what's going on​ during tax time .​
Income tax is​ a​ tax paid on​ income,​ unfortunately no matter how little it​ is​ .​
It's paid by employees and people who are self-employed and may also be payable if​ you​ are not working but you​ have an​ income,​ such as​ a​ retirement pension or​ an​ occupational pension .​
Not all types of​ income are taxable and it​ will seldom be the​ case that all of​ your income is​ taxed .​
There is​ no minimum age at​ which a​ person becomes liable to​ pay income tax .​
What matters is​ your income .​
If this is​ below a​ certain level,​ no tax is​ payable .​
There is​ actually no single definition in​ tax law of​ income .​
Income tax law divides various types of​ income into schedules .​
If an​ item comes within a​ schedule it​ counts as​ income and income tax must be paid on​ it .​
The way the​ tax must be paid will depend on​ which schedule it​ falls into .​
The most common schedules are Schedule E for employees and Schedule D for the​ self-employed.
There are five main steps in​ calculating income tax:-
Step 1: Add together all your yearly income,​ including social security benefits,​ income from renting out accommodation,​ wages,​ occupational pension,​ interest from bank and building society accounts.
Step 2: Take off any income which is​ exempt from tax .​
Calculate whether you​ can claim tax relief on​ any of​ the​ money you​ have spent over the​ year (tax relief usually applies to​ people who are self-employed and have to​ buy items for the​ business) .​
Deduct this tax relief .​
This leaves income on​ which tax may be payable (taxable income).
Step 3: Work out which tax allowances you​ are entitled to​ .​
You will be entitled to​ a​ personal allowance (plus age related additions if​ appropriate) .​
These allowances are deducted at​ this stage in​ the​ calculation.
Step 4: Multiply the​ taxable income by the​ correct tax rate .​
This gives the​ tax due to​ be paid that year,​ unless you​ are entitled to​ married couple's allowance for over 65 year olds.
Step 5: If applicable,​ deduct the​ appropriate percentage rate of​ married couple's allowance for over 65 year olds.
Some income is​ exempt from income tax,​ which means that tax is​ never paid on​ this income .​
This income should therefore be put to​ one side before any tax calculation can be done .​
Examples of​ income which is​ exempt from tax include premium bond prizes,​ housing benefit,​ child benefit and profit-related pay .​
It is​ therefore necessary to​ check whether any income is​ exempt from tax before doing a​ tax calculation .​
For more income tax help,​ all the​ help you​ need in​ on​ the​ internet .​
The IRS itself can give you​ income tax help and answer any tax questions you​ may have.

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