Income Tax Help

There are lots of websites on the Internet nowadays that provide much needed income tax help for those who don’t know much about what's happening during tax time. Income tax is a tax paid on income, unfortunately no matter how small it is. Income tax is paid by employees and individuals who are self employed and might also be payable if you are not working but you have an income, such as a retirement pension or an occupational pension.

Not all types of income are taxable and it will rarely be the case when all of your income is taxed. There is no minimum age at which a person becomes legally responsible to pay income tax. The only thing that matters is your income. If this is less than a certain level, no tax is payable.

There isn’t really a single definition in tax law of income. Income tax law divides various forms of income into schedules. If an item comes within a schedule it is considered income and income tax must be paid on it. The way the tax should be paid will depend on which schedule it belongs to. The most common tax schedules are Schedule E for employees and Schedule D for the self-employed people. 

There are 5 main steps in calculating income tax:- 

Step 1: Add together all your yearly income, including social security benefits, income from renting out accommodation, wages, occupational pension, interest from bank and building society accounts. 

Step 2: Take off the income that is exempt from tax.  Calculate to see if you can claim tax relief on any of the money you have spent over the year (tax relief generally applies to individuals who are self-employed and need to buy items for the business).  Deduct this tax relief.  This leaves income on which tax may be payable, or taxable income. 

Step 3: Work out which tax allowances you're entitled to use.  You will be entitled to a personal allowance (plus age related additions if suitable).  These allowances are deducted during this phase in the computation. 

Step 4: Multiply the taxable income by the accurate tax rate.  This gives you the tax due to be paid for that year, except if you are entitled to married couple's allowance for over 65 year olds. 

Step 5: If applicable, deduct the correct percentage rate of married couple's allowance for over 65 year olds. 

Certain income is exempt from income tax.  This means that tax is actually never paid on this income.  This income should consequently be place to one side before any tax computation can be done.  Some examples of income that is exempt from tax are premium bond prizes, housing benefit, child benefit and profit-associated pay.  Therefore, it is required to check whether any income is exempt from tax before performing a tax calculation.  For additional income tax help, all the help you want is on the internet.  The IRS itself could offer you income tax help and answer any tax questions you might have.