In Flower Mound TX there is a group of tax experts who offer services that will guide you through the maze of complexities that is our federal tax system. These are the experts at Master Plan Tax Services (MPTS). The tax laws change every year and 2020 was not any different. The following is just a short overview of the complexities you may face in preparing your own taxes and why Master Plan Tax Services is so eager to serve you.
First, you must calculate your gross income from all sources. Most types of income will figure into your gross income. Income from wages and self-employment income are included. Most interest income is included as are dividends, capital gains, winnings, and royalties. It is not always straightforward as to what income to include in gross income though. Often Social Security is not included or just partially included. Other examples of income not included are interest from municipal bonds, jury awards for damages, and certain disability and retirement income.
Once you have accurately calculated your gross income, you then figure if there are any adjustments to that income that may reduce it. If you are self-employed you should have an adjustment for self-employment tax. Other adjustments can include contributions to plans for retirement, or education, or health savings accounts. There are adjustments for alimony and repaid income that you should not have received, but did report.
Once your adjustments are figured, you are left with Adjusted Gross Income (AGI). AGI must be further reduced to determine your actual taxable income. To make these reductions you must determine whether it is most beneficial to take a standard deduction or an itemized deduction.
A standard deduction is a set amount based on one’s filing status. Your filing status is based on your marital or relationship status. It is either going to be married filing jointly, married filing separate, head of household, single, or qualifying widow/er. One must know the rules for determining each status and one’s standard deduction. Other aspects of one’s taxes are determined by filing status as well.
If it is more beneficial to itemize your deductions, it will generally be because your itemized deductions are worth more. You must know all the itemizable deductions that you are eligible for. Some of the better known itemizable deductions are mortgage interest payments and charitable giving, but did you know that you may be able to deduct clothing purchased for work if it is not suitable for everyday wear. There are too many possible itemizable deductions to mention here.
Once you subtract your deductions and any eligible exemptions that you have for children or other individuals who live in your home, you should arrive at your net taxable income (TI). Calculating tax based on your TI is not always so simple. Capital gains that you may have are likely to be taxed at different rates for instance.
Take advantage of the tax services offered by MPTS in Flower Mound TX to help you through these complexities and to pay as little tax as possible.