Introduction
Filing of tax returns is a common practice in most countries. To file for a tax return an individual needs to fill in a tax form and file with a government body that is mandated to carry out the function. When filing in the tax reforms, the taxpayer discloses the tax liability he owes the tax authority. Individuals who earn a certain level of income should disclose their income status. However, such individual should file for a tax return for a number of reasons such as federal income tax withheld, making work pay credit, additional child tax credit, first time home buyer tax credit, American opportunity credit, and health coverage tax credit among others. Thus, it is beneficial for an individual to file for taxes with the federal government since they may earn a tax refund.
Thesis statement
The paper attempts to carry out a discussion on the tax returns for Harold Peterson and Sarah Peterson.
Reasons for the selection of the forms used
In the case of Harold Peterson and Sarah Peterson, form 1040 will be used to file for their tax return. Form 1040 is the form of the US Individual Income Tax Return. The form is chosen over the other form such as form 1040A for a number of reasons. First, the form is used for filing individual income tax for a number of statuses such as for a single person, married people either jointly or separately, head of household, and a qualifying widower with a dependent child among others (Eisner, 1989). Thus, the form will allow Harold Petersan and Sarah Petersan to file for their income tax return either jointly or separately. Form 1040 comprises of five sections these are income, adjusted gross income, tax and credit, other taxes, and payments. The sections in the form 1040 will enable an individual to compute the amount of tax liability or refund. Another reason why it is appropriate to use form 1040 is because it allows the married couple that is, Harold and Sarah Petersan to file for the returns for the home sales. However, they had not lived in that house; form 1040 would have given the married couple an option of filing for the gains on the sale of the house in Schedule D of the form. Further, schedule A of the form allows the married couple to achieve the highest deduction from their income before applying a tax rate. Further, Harold and Sarah Petersan can file for the cost of the child care incurred for the year in form 2441. This will be as an appendix in the form 1040. Once all the forms have been completed Petersan’s family will collect a refund amounting to $2,323 (Apps, 1981).
Section of form 1040
Form 1040 contains a number of sections. The first section is the filing sector while the second section gives a number of the exemptions. The filing status indicates whether the couple will file for their tax returns either singly, ‘married filing jointly’ or “married filing separately’ (Wall Street Journal, 2007). In this case, Harold and Sarah Petersan intend to file for their tax return jointly as a married couple. Thus, it will indicate how the married couple intends to file their returns. The filing status is of utmost significance when the taxpayer picks on standard deduction because it will enable them to come up with the value of the standard deduction. The second section indicates the exemptions. Thus, it will indicate the exemptions that Paterson is entitled to. It is because the amount of the exemptions will lower the amount of the taxable income of the family because one computing the taxable income, Petersan will deduct the amount of the exemption from the aggregate gross income (Wanniski, 1978). The amount of the exemption comprises of exemptions for their dependents and their spouse. The third section of form 1040 gives the amount of income. The captures income from a number of sources. All these incomes are added together to obtain the value of the total income. The fourth section of form 1040 comprises of the adjusted gross income. In this section, the value of the total income is adjusted by certain to get the value of the adjusted gross income. The next section of form 1040 gives the amount of tax and credits. The section gives the value of the standard deduction, the exemptions, taxable income, tax, and alternative minimum tax. The section also enumerates a number of tax credits. The tax credits are deducted from the amount of the tax. The next section comprises of the amount of other taxes. Thus, the form follows a chronological order and it allows a taxpayer to compute the amount of tax refund or the amount the taxpayer owes the tax authority. At the end of the form, the taxpayer is expected to sign off against the form (Cox, et al., 1998).
Conclusion
The paper carried out a discussion on the tax returns for Harold Peterson and Sarah Peterson. From the analysis above, it can be observed that a taxpayer should select an appropriate form to file for the tax returns. This will depend on the nature of income of the individual.
References
Apps, P. (1981). A theory of inequality and taxation. Cambridge: Cambridge University Press.
Cox, M., David, G., and Roy, R. (1998). Income taxes as reciprocal tariffs. Economic Review – Federal Reserve Bank of Dallas, 8 (1), 2-9. Web.
Eisner, R. (1989). The total incomes system of accounts. Chicago: University of Chicago Press.
Wall Street Journal. (2007). Tax and income. Web.
Wanniski, J. (1978). The way the world works. New York: Simon and Schuster.