Your Guide to Taxes

1. How taxes work

Most people in Los Angeles file two income tax returns each year: a federal return with the IRS and a state return with the California Franchise Tax Board (FTB).

• Brackets are marginal. Moving into a higher bracket only raises the rate on the dollars above that line, not on all of your income.
• Deductions lower the income you are taxed on. Credits lower your tax bill dollar for dollar, so a credit is usually worth more than a deduction of the same size.
• Withholding is tax taken from each paycheck. Your return settles the difference: if too much was withheld you get a refund, and if too little you owe.
• A big refund is not a bonus. It is your own money returned without interest. Adjusting your W-4 can put it back in your paychecks instead.

2. Key deadlines

Dates move to the next business day when they fall on a weekend or holiday.

An extension gives you more time to file, not more time to pay. Interest and penalties start on any balance still owed after April 15.

3. Documents to gather

• Photo ID and Social Security numbers for you, your spouse and any dependents
• W-2s from every employer
• 1099 forms for freelance work, interest, dividends, stock sales, retirement payouts and unemployment
• 1098 forms for mortgage interest and student loan interest
• Form 1095-A if you had a Covered California plan
• Records of charitable gifts, medical costs, property taxes and childcare
• Last year's federal and state returns
• Bank account and routing numbers for direct deposit

Keep your returns and supporting records for at least four years. The IRS can usually look back three years and California four.

4. Deductions and credits to look for

• Standard or itemized: you take whichever is larger. Itemizing can win if you pay mortgage interest, high property taxes or give a lot to charity.
• Child Tax Credit and dependent care: for children and for daycare costs while you work.
• Earned Income Tax Credit: federal and California (CalEITC) credits for low to moderate earners. Many people who qualify never claim them.
• Education credits: the American Opportunity and Lifetime Learning credits for college costs, plus the student loan interest deduction.
• Retirement savings: traditional IRA and 401(k) contributions can lower your taxable income, and the Saver's Credit can add more.
• Health Savings Account: contributions are deductible on your federal return. California does not allow this deduction, which is a common surprise.
• California renter's credit: a small credit for renters under the income limit.

Limits and income cutoffs change every year, so check what applies to the year you are filing for.

5. Common mistakes to avoid

• Leaving out a 1099. The IRS gets a copy of every one and will match it to your return.
• Picking the wrong filing status, such as Single when Head of Household would save you money
• Typos in names, Social Security numbers or bank details
• Claiming a dependent that someone else is also claiming
• Missing estimated payments when you have income with no withholding
• Filing late when you owe. The failure to file penalty is much larger than the failure to pay penalty, so file on time even if you cannot pay in full.

6. If you are self-employed or own a business

• Self-employment tax: you pay both the employee and employer share of Social Security and Medicare, on top of income tax.
• Quarterly payments: with no employer withholding, you usually need to pay estimated tax four times a year.
• Business expenses: ordinary and necessary costs like supplies, software, a home office, mileage and phone use can be deducted when they are documented.
• Separate accounts: keep business and personal money apart. It makes bookkeeping easier and protects you in an audit.
• Choosing an entity: sole proprietor, LLC, S corporation and partnership are taxed differently. The right choice can save real money as you grow.
• Payroll and contractors: hiring brings payroll tax filings plus W-2s and 1099s to send each January.

7. IRS letters, notices and scams

• Do not ignore a letter. Most notices have a response deadline, and many are simple fixes when answered on time.
• Read it before you pay. Notices are sometimes wrong, and you have the right to dispute them.
• Know how the IRS contacts you. It starts by mail. It will not call, email or text demanding immediate payment by gift card, wire or crypto, or threaten arrest.
• Unsure if it is real? Do not call the number on a suspicious message. Contact the IRS through irs.gov, or send it to us and we will take a look.

8. What to look for in a tax preparer

9. Why work with Garo

Garo has run 818 Accounting Serve for 10 years, helping individuals, families and small businesses across Los Angeles file with confidence.

• 10 years of experience with personal and business returns, at both the federal and California level.
• You work with Garo directly. No call centers and no rotating seasonal staff.
• Every deduction and credit you are owed. Garo looks closely at your situation so you keep more of your money.
• Accurate and on time. Every return is carefully reviewed before it is filed.
• Year-round help. Planning in the fall, answers in the summer, and help with IRS and FTB letters any time.
• All in one place. Tax preparation, bookkeeping, payroll and business planning, so nothing falls through the cracks.
• Clear, upfront pricing. You know the fee before any work begins.

10. Get started

Have a question about your taxes or a letter from the IRS? Call 310-941-1144, email garog@818accountingserve.com, or book a free consultation.

This guide is general information, not tax advice for your situation. Tax rules change often. Contact us before acting on anything here.