Taxes: the basics
The United States uses income taxes to pay for various government programs—everything from highways to military equipment is supported by your tax dollars.1 That’s why we pay taxes. When the city fixes a pothole on your street, or a veteran receives healthcare benefits, those are your tax dollars at work.
Rather than paying all taxes at once at the end of the year, most people have small amounts of money taken from each paycheck to go toward any taxes they might owe.2 Then, in April, we file our “tax return” to make sure we’re square with the Internal Revenue Service (IRS)—the government agency responsible for collecting taxes.
So when we talk about “doing your taxes,” we really mean, “settling up with the IRS.” At the end of the year, sometimes you owe them a little. Sometimes they owe you a little. Filling out your tax return is how you figure out who owes whom, and how much.
It’s worth noting that a lot of people—about 45 percent of Americans in 20153—don’t earn enough money to owe any federal income tax. If that’s you, you still don’t get to relax completely when April rolls around. Even if you know for sure you won’t owe any taxes, you still need to fill out and submit a tax return.4
In addition to filing a federal tax return, you may also need to file tax returns in any states where you earned money. Fortunately, the mechanics of doing your state taxes are very similar to doing your federal taxes here, so although we’ll mostly be talking about federal taxes today, much of this advice also applies to state taxes.
While you probably already know this, it’s worth repeating: You really, really want to settle up with the IRS and your state’s department of revenue. Not paying your taxes might cause your wages to be garnished or in a worst-case scenario, land you in prison.5 Yikes.
Table of Contents:
- Taxes: the basics
- How do taxes work anyway?
- Step 1: Preparing to File
- Step 2: Select your method of filing
- Step 3: Filing & receiving your tax return
- Glossary of terms you may encounter
- Tax FAQs
- About the experts
- Works Cited