People always dread that time of the year when they have to file their tax returns. This is because filing for tax returns is a tedious process, and people often end up making erroneous calculations. To prevent such fiascos from occurring, a majority of people hire professionals to help estimate their tax returns.

The tax return forms are filed with the taxing authority, and you need to report your income, expenses, and other pertinent tax-related information on this form. The tax returns are instrumental in helping taxpayers calculate their tax liability or schedule their tax payments. It even helps them request refunds in case of overpayment of taxes.

• Income section: This section will list the individual’s every income source. It is usually reported in the W-2 tax form, and you have to report other wages, royalties, self-employment income, and capital gains.
• Deductions: These deductions are instrumental in reducing one’s tax liability. The deductions are subject to vary according to the jurisdictions. Taxpayers can itemize deductions or opt for standard deductions applicable to their filing status.

Though dividing the tax returns into three sections is instrumental in making the process of estimating tax return easier, it still results in a pandemonium-like situation for people who are filing their tax returns for the first time. To prevent such situations from arising, you can use online income tax estimators that are designed to ensure that you estimate your tax returns correctly on filling the right details.

Using an income tax estimator
There are various websites on the Internet that allow taxpayers to estimate their income tax returns by using their income tax estimators. Some income tax estimators are free, whereas, there are other more comprehensive estimators that charge a certain fee before the taxpayers can use it.

Estimating your income tax returns can be a bit overwhelming if you are doing it for the first time, but these income tax estimators have all the sections planned out with great precision, so you know exactly which information goes where.

Basic information: The first section you will come across in the income tax estimator will be that of your basic information. As the name indicates, all you have to do is fill in your personal details here. These include your date of birth, whether you are single or married, and can qualify as the head of the household. In addition to these personal details, you need to answer whether you qualify as a widow(er). The second part of this section aims to seek information about the dependents. You have to answer whether you can be claimed as a dependent, or if you have any dependents.

Income section: This is the most important section since the right income details will allow you to estimate the income tax accurately. Here, you will have to fill in the exact amount of your taxable wages, your net business income or losses if any, the federal taxes withheld and the estimated payments, the interest income, and the unemployment income. In addition to these details, you need to fill details about any additional income such as dividend income, qualified dividends, short-term capital gains or loss, long-term capital gains or loss, state tax refund, taxable IRA and pensions, Social Security benefits, and other taxable income. In a gist, this section requires you to list all the details about all your income sources.

Deductions: Your tax deductions play a pivotal role in estimating your tax returns since it reduces your tax liability. So, it is essential that you list accurate details pertaining to your tax deductions. In this section, you will be asked if you have any IRA contributions, the amount of student loan interest you have paid, your medical and dental expenses, state and local taxes you have paid, mortgage interest, charitable contributions, and your qualified business income deduction.

Credits: This section of the income tax estimator is dedicated to the usual tax credits that taxpayers claim. Here, you have to state the details of whether you pay child care expenses, if you made energy-saving improvements to your home, pay for college education expenses. After filling out these details, you need to fill in details of your other credits, if you have any.

Results: After filling in the right details in all the sections, your results will be displayed; your taxable income is calculated on the basis of your total income, adjustments, deductions, and qualified business income deductions. Moreover, your refundable income is calculated on the basis of the tax, alternative minimum tax, credits, other taxes, withholdings and estimated payments, and the refundable credits.

An income tax estimator does exactly what it has to – it estimates the income tax returns. However, if you wish for assistance in tax planning, you will need more than just an income tax estimator.