As the new tax season approaches, it is good to know what your filing status will be and if you even need to file taxes. How do you determine if you need to file a tax return? I’ll answer that question for your in today’s article. I’ll also breakdown moments when you’re not required to file a tax return.
What are Tax Exemptions?
Tax exemption is a monetary amount given to help reduce your taxable income. Usually, you can deduct a specific amount for each exemption claimed for that particular tax year.
There are 2 types of exemptions you can deduct:
- Personal exemptions for you and your spouse
- Exemptions for dependents known as dependency exemptions
What Filing Status Should I Use?
It is very important to select the correct filing status when filing your individual tax return. Many tax credits, deductions, and the amount of taxes paid are dependent upon the filing status selected. At times, more than one filing status may apply to you. In this case you should work with your tax advisor to figure out which status is best for you.
The 5 Filing Statuses:
- Married Filing Jointly
- Married Filing Separately
- Head of Household
- Qualifying Widow(er) with dependent child
An ITIN (individual taxpayer identification number) is a 9-digit number issued by the IRS to you, the taxpayer, who does not have or is not eligible for Social Security Number.
How to recognize an ITIN?
- ITIN is a 9-digit number that begins with the number 9
- Has a range of 70 – 88, 90 – 92, and 99 – 94 in the fourth and fifth digits
Are you ever confused when your tax advisor says “take this exemption” or “let’s use this deduction?”
Don’t worry, you are not alone.
Most tax payers are not aware of the difference between a tax exemption and a tax deduction. I take pride in teaching you how to achieve financial peace in many different ways and this is one topic I’d love to explain to you.
Now let’s break down the difference between a tax exemption and a tax deduction!