Filling out your federal tax forms can be a daunting and confusing task. However, it is worth the effort. Once you make more income than your federal personal exemption allows, you are legally obligated to fill out your federal tax form. However, people who make less than the exemption may also want to fill out a federal tax form for various reasons.
Filing an income tax return creates contribution room in various registered savings vehicles. You can also submit deductions that you can use later when you are in a higher income bracket. You might be eligible to receive various tax credits.
You usually have your federal income taxes deducted off your pay by your employer. However, people who are contract workers or are self-employed need to remit their income taxes themselves. Your employer will have your fill out a form to determine the amount of income tax to deduct from your pay. This can be based on a number of things such as your marital status, and your pay level. Income tax rates increase when you reach certain salary levels. You usually fill out this form when you begin your new job. You may want to update this form when your life situation changes, to ensure you continue to pay the appropriate level of taxes. If you are self-employed, you can access this form through your local federal government office, or online. It is important to have the proper amount of tax deducted from your salary. If you pay too much, you are literally giving the government an interest free loan. Where else could anyone get a loan like that? You should keep your money to pay down debt, save for retirement, or a take vacation.
Federal income tax forms should be filled out within the first few months in the New Year. If you file your tax form late, then you will have to pay penalties on any amounts owing. If the taxman owes you money, you are again offering a free loan if you are late to collect.
You will need to fill out a number of forms in addition to your federal income tax form. These will differ depending on your situation.