Everything You Need To Know About Taxes
How do you know if you’ll have to pay taxes?
You must pay taxes if your income exceeds the standard deduction for your filing status. In most cases, your annual income, filing status , and age determine if you’ll have to file a tax return. The IRS provides an interactive tool on its website to help you figure out if you have to file and pay taxes. If you’re entitled to a tax refund, you’ll want to file even if you don’t have to.
What happens if you don’t file taxes?
The IRS imposes a failure-to-file penalty of 5% of the amount owed on your tax return per month, up to five months, until you file. You’ll have to simultaneously pay $435 or 100% of the tax due—whichever is less—after 60 days. Eventually, the IRS may file a substitute return for you, which most likely won’t include any tax credits or deductions you qualify for.
What’s the earliest you can file taxes?
The filing season for annual tax returns typically begins the last week of January. While you can file your federal tax return as soon as you receive all the relevant documents you need, the IRS will not process your return before the official opening date. The IRS usually announces the official start of the tax filing season on its website.
What makes you have to pay back taxes?
If you don’t pay your taxes, the IRS will bill you and start the official collection process. If you don’t pay that bill, the IRS will seize any refunds that you’re owed in future tax years. It may also file liens and levies against your property and earnings until you are caught up on your back taxes. The IRS offers payment options if you’re unable to pay your tax bill in full immediately.
How long does it take for taxes to come back?
The IRS states that the majority of taxpayers who are owed a refund should get it in less than 21 days. It could take longer though if the IRS has to review your return or if you filed by mail. To speed things up, file electronically and use direct deposit. The IRS online tool “Where’s My Refund?” can help you check the status of your federal tax refund. State tax refunds may take up to 90 days.
How can you get more money back on taxes?
A hefty tax refund is often the result of overpaying taxes through withholding over the course of the year, or refundable tax credits. The Child Tax Credit and the Earned Income Tax Credit are both refundable tax credits. Tax deductions can also help reduce your taxable income. Then, nonrefundable tax credits can help erase your tax bill. All may help you get more money back on taxes.
Your tax liability is any amount you owe a taxing authority, such as the Internal Revenue Service (IRS). Having liability means you’re responsible for something. There can be several components to your total tax liability with an agency, including unpaid taxes from prior years.
Form W-4 provides your employer with your filing status, and optionally, the number of dependents you have, and the tax credits and deductions that you intend to claim when you file your return. The information you include determines how much your employer withholds from your paycheck.
Form W-2 is the annual "Wage and Tax Statement" that reports your taxable income earned from an employer to you and to the Internal Revenue Service (IRS). The form also includes taxes withheld from your pay, as well as Social Security and Medicare payments made on your behalf by both you and your employer.
The term "tax year" refers to the calendar year for most individual taxpayers—the 12 months from Jan. 1 through Dec. 31 when you earned income, had taxes withheld from your pay as an employee, paid in quarterly estimated taxes if you're self-employed, or made tax-deductible expenditures. It's the year preceding the typical April 15 deadline for filing your tax return.
Internal Revenue Service (IRS)
The Internal Revenue Service (IRS) is the federal agency that collects tax revenue for the federal government. It's the entity that's behind all those deductions in your pay and those quarterly estimated tax payments you make if you're self-employed. The IRS has rules you must follow and, if you choose not to, you can face some pretty stiff consequences.
A tax return reports income and earnings to the Internal Revenue Service (IRS). Filing one allows taxpayers to claim various deductions to reduce their taxable income to the least amount possible.
Effective Tax Rate
Your effective tax rate is the percentage of your overall taxable income that you pay in taxes. “Effective” is a tax way of saying “average,” and this rate is usually considerably less than your marginal tax rate, which is hinged to your highest tax bracket.
A dependent is someone for whom you’ve provided substantial financial support during the tax year. There are several other criteria that must be met as well, depending on their age and their relationship to you. Being able to claim them on your tax return can literally save you thousands of dollars.
Tax evasion is the willful and illegal failure to pay taxes to the government. Taxpayers found guilty of federal tax evasion are subject to criminal prosecution by the U.S. Department of Justice under the IRS tax code.
Currently Not Collectible
If you're financially unable to make tax payments, you may qualify for the IRS to report your account as “currently not collectible.” This means you can defer making payments to the IRS until you're financially able to pay.