This part explains whether you have to file an income tax return and when you file it. It also explains how you pay the tax.
Do I Have To File an Income Tax Return?
You have to file an income tax return for 2005 if your net earnings from self-employment
were $400 or more. If your net earnings from self-employment were less than $400, you
still have to file an income tax return if you meet any other filing requirement listed
in the Form 1040 instructions.
How Do I File?
File your income tax return on Form 1040 and attach Schedule C or Schedule C-EZ. Enter
the net profit or loss from Schedule C or Schedule C-EZ on page 1 of Form 1040. Use
Schedule C to figure your net profit or loss from your business. If you operated more
than one business as a sole proprietorship, you must attach a separate Schedule C for
each business. You can use the simpler Schedule C-EZ if you operated only one business
as a sole proprietorship, you did not have a net loss, and you meet the other requirements
listed in Part I of the schedule.
IRS e-file (Electronic Filing)
You may be able to file your tax returns electronically using an IRS e-file option.
Table 1-1 lists the benefits of IRS e-file. IRS e-file uses automation to replace most
of the manual steps needed to process paper returns. As a result, the processing of e-file
returns is faster and more accurate than the processing of paper returns. As with a paper
return, you are responsible for making sure your return contains accurate information and
is filed on time.
Using e-file does not affect your chances of an IRS examination of your return.
You can file most commonly used business forms using IRS e-file. For more information, visit the IRS website at www.irs.gov.
Electronic signatures. Paperless filing is easier than you think and it's available to most taxpayers who file electronically including those first-time filers who were 16 or older at the end of 2005. If you file electronically using tax preparation software or a tax professional, you may be able to participate in the Self-Select PIN (personal identification number) program. If you are married filing jointly, you and your spouse will each need to create a PIN and enter these PINs as your electronic signatures.
To create a PIN, you must know your adjusted gross income (AGI) from your originally filed 2004 income tax return (not from an amended return, Form 1040X, or any math error notice from the IRS). You will also need to provide your date of birth (DOB). Make sure your DOB is accurate and matches the information on record with the Social Security Administration before you e-file. To do this, check your annual Social Security Statement.
If you use a Self-Select PIN, there is nothing to sign and nothing to mail - not even your Forms W-2. For more details on the Self-Select PIN program, visit the IRS website at www.irs.gov.
Forms 8453 and 8453-OL. Your return is not complete without your signature. If you are not eligible or choose not to sign your return electronically, you must complete, sign, and file Form 8453, U.S. Individual Income Tax Declaration for an IRS e-file Return, or Form 8453-OL, U.S. Individual Income Tax Declaration for an IRS e-file Online Return, whichever applies.
State returns. In most states, you can file an electronic state return simultaneously with your federal return. For more information, check with your local IRS office, state tax agency, tax professional, or the IRS website at www.irs.gov.
Refunds. You can have your refund check mailed to you, or you can have your refund deposited directly to your checking or savings account.
With e-file, your refund will be issued in half the time as when filing on paper. Most refunds are issued within 3 weeks. If you choose Direct Deposit, you can receive your refund in as few as 10 days.
Offset against debts. As with a paper return, you may not get all of your refund if you owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support. You will be notified if the refund you claimed has been offset against your debts.
Refund inquiries. You can check the status of your refund if it has been at least 3 weeks from the date you filed your return. Be sure to have a copy of your tax return available because you will need to know the filing status, the first social security number shown on the return, and the exact whole-dollar amount of the refund. To check on your refund, do one of the following.
Go to www.irs.gov, and click on Where's My Refund.
Call 1-800-829-4477 for automated refund information, and follow the recorded instructions.
Call 1-800-829-1954 during the hours shown in your form instructions.
Balance due. If you owe tax, you must pay it by April 17, 2006, to avoid late-payment penalties and interest. You can make your payment electronically by scheduling an electronic funds withdrawal from your checking or savings account or by credit card.
Using an Authorized IRS e-file Provider
Many tax professionals can electronically file paperless returns for their clients. You
have two options.
You can prepare your return, take it to an authorized IRS e-file provider, and have the provider transmit it electronically to the IRS.
You can have an authorized IRS e-file provider prepare your return and transmit it for you electronically.
You will be asked to complete Form 8879 to authorize the provider to enter your self-selected PIN on your return.
Depending on the provider and the specific services requested, a fee may be charged. To find an authorized IRS e-file provider near you, go to www.irs.gov or look for an "Authorized IRS e-file Provider" sign.
Using Your Personal Computer
A computer with a modem or Internet access is all you need to file your tax return
using IRS e-file. Best of all, when you use your personal computer, you can e-file
your return from the comfort of your home any time of the day or night. Sign your
return electronically using a self-selected PIN to complete the process. There is
no signature form to submit or Forms W-2 to send in.
Free Internet filing options. More taxpayers can now prepare and e-file their individual income tax returns free using commercial tax preparation software accessible through www.irs.gov or www.firstgov.gov. The IRS is partnering with the tax software industry to offer free preparation and filing services to a significant number of taxpayers. Security and privacy certificate programs will assure tax data is safe and secure. To see if you qualify for these services, visit the Free Internet Filing Homepage at www.irs.gov.
If you cannot use the free services, you can buy tax preparation software at various electronics stores or computer and office supply stores. You can also download software from the Internet or prepare and file your return completely online by using a tax preparation software package available on the Internet.
Through Employers and Financial Institutions
Some businesses offer free e-file to their employees, members, or customers. Others
offer it for a fee. Ask your employer or financial institution if they offer IRS
e-file as an employee, member, or customer benefit.
Free Help With Your Return
Free help in preparing your return is available nationwide from IRS-trained
volunteers. The Volunteer Income Tax Assistance (VITA) program is designed to
help low-income taxpayers and the Tax Counseling for the Elderly (TCE) program
is designed to assist taxpayers age 60 or older with their tax returns. Some
locations offer free electronic filing.
| Table 1-1. Benefits of IRS e-file | |
| Accuracy | Your chance of getting an error notice from the IRS is significantly reduced. |
| Security | Your privacy and security are assured. |
| Electronic signatures | Create your own personal identification number (PIN) and file a completely paperless return through your tax preparation software or tax professional. There is nothing to mail! |
| Proof of acceptance | You receive an electronic acknowledgement within 48 hours that the IRS has accepted your return for processing. |
| Fast refunds | You get your refund in half the time, even faster with Direct Deposit - in as few as 10 days. |
| Free Internet filing options | Use the IRS website www.irs.gov to access commercial tax preparation and e-file services available at no cost to eligible taxpayers. |
| Electronic payment options | Convenient, safe and secure electronic payment options are available. E-file and pay your taxes in a single step. Schedule an electronic funds withdrawal from your checking or savings account (up to and including April 17, 2006) or pay by credit card. |
| Federal/State filing | Prepare and file your federal and state tax returns together and double the benefits you get from e-file. |
When Is My Tax Return Due?
Form 1040 for calendar year 2005 is due by April 17, 2006. If you use a fiscal
year (explained in Accounting Periods and Methods),
your return is due by the 15th day of the 4th month after the end of your fiscal year.
If you file late, you may have to pay penalties and interest. If you cannot file your
return on time, use Form 4868, Application for Automatic Extension of Time To File
U.S. Individual Income Tax Return, to request an automatic 6-month extension.
How Do I Pay Income Tax?
Federal income tax is a pay-as-you-go tax. You must pay it as you earn or receive
income during the year. An employee usually has income tax withheld from his or her
pay. If you do not pay your tax through withholding, or do not pay enough tax that
way, you might have to pay estimated tax. You generally have to make estimated
tax payments if you expect to owe taxes, including
self-employment tax, of $1,000 or more when you file
your return. Use Form 1040-ES to figure and pay the tax. If you do not have to make
estimated tax payments, you can pay any tax due when you file your return. For more
information on estimated tax, see Publication 505.
What are my payment options? You can pay your estimated tax electronically using various options. If you pay electronically, there is no need to mail in Form 1040-ES payment vouchers. These options include:
Paying electronically through the Electronic Federal Tax Payment System (EFTPS).
Paying by authorizing an electronic funds withdrawal when you file Form 1040 electronically.
Paying by credit card over the phone or by Internet.
Other options include crediting an overpayment from your 2005 return to your 2006 estimated tax, and mailing a check or money order with a Form 1040-ES payment voucher.
EFTPS
To enroll in EFTPS, go to www.eftps.gov or call 1-800-555-4477.
When you request a new EIN and you will have a tax obligation, you are automatically enrolled in EFTPS.
Benefits of EFTPS:
The chance of an error in making your payments is reduced.
You receive immediate confirmation of every transaction.
Penalty for underpayment of tax. If you did not pay enough income tax and self-employment tax for 2005 by withholding or by making estimated tax payments, you may have to pay a penalty on the amount not paid. The IRS will figure the penalty for you and send you a bill. Or you can use Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if you have to pay a penalty and to figure the penalty amount. For more information, see Publication 505.
Information courtesy of the Internal Revenue Service.
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