The best magazine
- 1). Gather all your receipts, your most recent pay stub, records of other income and a Form 1040 of the type you usually use -- most likely a 1040EZ, 1040A or long-form 1040. You will be preparing a mock tax return. The IRS advises self-employed people and others who may have to pay taxes to do this so you can estimate your expected gross income, taxable income, taxes, deductions and credits for the year.
- 2). Total up your gross income. Examine your most recent pay stub, which lists your earnings to date and use that information to estimate your earnings for the remainder of the year. If you are an hourly wage earner, determine your average weekly pay by dividing your gross wages paid thus far by the number of weeks you have worked. Multiply the result by the number of weeks remaining in the year and add to the gross wages you've already earned. Enter your total gross earnings estimate for the year on line 7 of your 1040 form.
- 3). Gather and categorize your deductible receipts as you normally would -- or if nothing has changed significantly, you can use information from last year's tax return as an estimate. Total each category and fill in lines 23 through 35 on your mock 1040.
- 4). Use last year's tax return to estimate amounts for lines 8a through 20a, 40a through 53, 56 through 59 and 62 through 70. Adjust for any significant changes. On lines 8a through 20a, include information from various schedules. For example, Schedule C lists your business income and expenses -- you may have to fill it out to get a reliable estimate for line 12.
- 5). Find the amount of federal taxes you have already paid. Your employer has withheld these taxes and you can find the amount on your pay stub listed as "federal income tax withheld year-to-date" or something similar. If you are self-employed and don't receive a paycheck, you should already be filing a quarterly estimated tax return and paying taxes each quarter. In that case, add up the amounts you've already paid on your quarterly estimated tax returns. If you're not filing quarterly returns, then you've paid zero taxes so far this year.
- 6). Multiply your weekly federal income tax deduction (also listed on your pay stub) by the number of weeks left in the year and add the total to your year-to-date taxes. You now have the estimated taxes that will have been deducted by the end of the year. Enter this amount on line 61 of your mock 1040.
- 7). Follow the same procedure to prepare a mock state tax return, if your state collects personal income tax, to estimate whether you will get a refund or owe the state.
- 8). Go to an accountant to estimate your taxes for you if you have a complicated tax situation or you want to be certain about whether you will owe taxes. An accountant will be able to give you a more accurate estimate.
Source: ...