Learning About Tax Law Learning About Tax Law

The tax season is one of the most stressful for many people, especially those that are self-employed or own a business. Filing your income taxes has to be done every year but since the rules change often and the requirements can be hard to understand, the best way to make sure you have everything accounted for and all the paperwork correct is to have an income tax preparation professional help you prepare the filing. There are some important papers that you must take with you for the preparer to be able to prepare your taxes correctly, so here are some things you will want to bring along.

Earned Versus Unearned Income

The IRS is interested in everything you made for income over the year, not just what you made at work. Income is broken down into earned and unearned depending on the source it came from. For instance, the paycheck you receive from your full time job is earned income. You worked all week for a specified wage and were paid for it. But income from other sources like alimony, the sale of stocks, real estates sales, and other income you received from a source other than your job falls under unearned income. It is still income, but it may be taxed differently so it has to be reported differently. A professional tax preparer understands the rules and can help you make sure you report everything correctly.

Filing As Self Employed

If you are a sole proprietor and run your own business, you are self-employed. Reporting that income is different than if you work for a large company that sends you a check every week. For one thing, taxes are not deducted from your paycheck so you may not have already paid your taxes at the end of the year. If you are paying your taxes quarterly as the IRS suggests, it may be easier but if you didn't, you may be up against a lot of tax liability, so sitting down with a professional tax preparer is the best way to sort out what you have to pay and what are legitimate expenses. Be prepared to produce documentation and receipts of the income that you made and the expenses that when out for the business. They will want to see all of it to help determine what is nontaxable and what you will have to pay taxes on.

Proof of Income

Your tax preparer is going to need your proof of income when they start putting together your taxes. Payroll stubs are great but if you worked for another company, you should have a W-2 form that contains the company's information, the amount they paid you over the year, and the income tax that was taken out of your check and sent to the government through the year. This document is important, so make sure you take it to the preparer. If you have nothing else to show them, this one needs to be with your taxes.

Other Income Sources The preparer will need documentation of real estate sales, gambling winnings, alimony, child support, social security or retirement income, rental income, and even state tax refunds. All of these sources of income can be taxed so don't leave anything out. The preparer will help you determine what needs to be filed and what doesn't but they understand the tax codes so let them walk you through the process. Trying to figure it out on your own is fine for a single-job, no-asset tax filing, but when it gets more complicated, it is better to be safe than to miss something and be penalized later for it.