When determining what one owes in taxes, the government will often use two different methods: self-assessment and third-party assessment. With self-assessment, taxpayers are responsible for providing their own financial information to the government in order to calculate their tax liability. This includes gathering records such as income statements and expense documents as well as any applicable deductions or credits they may be eligible for. On the other hand, with third-party assessment, a government agency will collect financial information from outside sources such as employers or banks in order to determine an individual’s or business’ tax liability.
In addition to understanding which type of assessment method is being used by the government when calculating taxes due, it is important for taxpayers to also understand what types of information are being collected in order to make sure everything is accurate. For example, if self-assessment is being used then it would be important for individuals/businesses to provide detailed records of all income sources and expenses incurred throughout the year so that they can receive credit for all applicable deductions/credits available under law. It may also be necessary for them to provide additional documentation such as bank statements or investment account summaries depending on their specific situation in order to prove the accuracy of certain figures reported on their return (e.g., investment gains).
Finally, taxpayers should also make sure they understand how any changes made during tax preparation (or after filing) could impact their final tax bill – both positively or negatively – before signing off on it at the end of every year’s filing season! Making sure one understands how tax assessments work can help them properly prepare themselves financially ahead of time so that they don’t get caught off guard when dealing with unexpected changes down the road whether those changes come from within themselves (i.e., life events) or external forces (i.e., policy changes).