Calculating your tax refund can be an involved process. Many factors come into play when trying to get an idea of what you might receive back from the IRS. There are ways to create a rough estimate based on your pay stubs, if you work for a company. You can also gather certain information to help get a more accurate idea of what your refund will be. However, seeking a professional such as Tax Associates in Bronx, NY, is the best way to ensure that you have an accurate picture of the refund coming your way.
Essentially, calculating your refund is a balance of scales. You come up with the total of taxes that you should pay, vs. the total you did pay, and the amount left is either your refund or what you owe the IRS and State. New York City has an additional tax as well that must be calculated to come up with an accurate figure. To begin, you’ll want to start with the taxes you’ve paid throughout the year. Take a look at your last pay stub, or W-2. Make sure you are looking at the cumulative Federal taxes and the total State taxes. Also look at the local tax. You will want to add Medicare and Social Security taxes as well. If you do not have a total, multiply the amount on your pay stub by the appropriate amount of payments (for example, if you are paid bi-weekly, you would multiply the amounts by 12). These cumulative totals should give you an idea of how much you paid in taxes throughout the year.
You also want to ensure that you calculate your capital gains, any Social Security benefits, and IRA withdrawals, among other forms of income you may not have considered. Any taxable income will alter the amount that you owe in annual tax, and will be relevant information to determining your taxes paid. Unemployment income is also taxable, and should be considered within this equation. If you have any doubts about income and whether you paid taxes for receiving it, contact Tax Associates and one of their professionals will advise you.
Next, you will determine your deductions, and how much tax you owe. Your total deductions are the amount that the government applies back to what you owe. These can only take money off the total you owe, therefore resulting in a possible overpayment and creating a larger refund. Unlike a credit, which can actually add money to your refund, a deduction alone cannot bring you to more than $0 owed.
You can use a number of online calculators to figure out the deduction you qualify for, or you can use your basic 1040 form. Many factors contribute to this number, and this is the main reason that hiring a professional from Tax Associates is so important when filing your taxes. While figuring out what you paid is somewhat simple, figuring out what you owe, and applying any credits you may qualify for, is essential to increasing your refund and decreasing your financial obligation.
Your age, marital status, children, and health care are the first factors you will want to take into consideration for deductions. Knowing the definitions of these statuses beforehand can certainly help you save time at your tax appointment. You can find the allowable exemptions for these on your 1040, or punch them into your tax calculator. For example, if you are a dependent, your exemptions will be different than if you are single. Children can mean additional exemptions, and even credits which can be applied back to your refund.
Expenditures such as having a Health Savings Account that you used during the year, real estate taxes, student loan interest, alimony, and IRA contributions can also result in deductions for your tax return. Items such as Child and Dependent Care and Education can qualify you for certain credits that will add money to your refund. When applying for a credit, it is especially important to fully understand the credit you are applying for and its limitations. Tax Associates can help you figure out the details of the credits available this year, and ensure that you receive all credits you qualify for.
Filing taxes in New York is an exceptionally involved process, and requires specific knowledge of Federal, State, and County guidelines. For help preparing your taxes, or general questions to help you get started, contact a professional by clicking the link below.
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