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Tax Basics: Everything You Should Know

Whether we like it or not, the fact of the matter is that death and taxes are two certainties in life. While we cannot avoid either, we can be prepared for taxes if we know what to expect in advance. Let's therefore take a look at some of the most important taxation basics as well as how you can file your taxes without the use of a traditional financial adviser. 

Some Essential Information

First and foremost, it is pivotal to mention that you will be obliged to file a tax return if you earn more than $12,000 dollars in any given fiscal year. This is irrespective of how the money was earned. If you have earned less than this amount, you will generally not need to file taxes. Also, please note that those over 65 years of age are associated with different rules; be sure to check these out carefully if you have reached (or are about to reach) the age of retirement.

Another sticking point which need to be addressed involves the amount of tax that you are obligated to pay (in the form of a percentage). This will vary in regards to how much you earn in a given year. According to the latest information, you will have to pay 22% if you earn between $39,476 and $84,200 dollars during a financial year. Please keep in mind that this percentage will increase or decrease depending upon your reported income. For example, those who earn more than $510,301 dollars per year will need to pay a 37% marginal tax rate.

It should also be mentioned that those who might be living abroad (or who earn a partial income from overseas enterprises) will still need to report their income to the Internal Revenue Service if they earn more than the minimum threshold mentioned above. This is known as double taxation and failing to report your earnings could result in stiff penalties.

Let's also not fail to mention the due dates for filing your taxes. While the exact day will vary from year to year, it generally falls on or around 15 April. To put it another way, the IRS will need to RECIEVE your paperwork (such as a W-2 or a W-4) before this date. This is why it is a good idea to prepare all information well in advance and to mail it on or before 1 April.

In terms of filing, this can be a bit trickier. The good news is that those who earn $66,000 dollars or less can electronically file their taxes for free by navigating to the official IRS website. If you happen to have earned more than this, you might need the assistance of a professional brokerage service such as TurboTax or H&R Block. This might even be slightly easier if you are worried about filing intricacies or making potential mistakes along the way. However, the concept of online filing has gained ground in recent years. What is involved and what do you need to know?

How to File Your Taxes Online

The most common way is to utilize the services provided by the official IRS website (www.irs.gov). You will first need to choose a “free file” virtual company that will help with the preparation while determining that you have all of the necessary information. You can also look for specific tax breaks depending upon your eligibility. This may be found at the IRS page devoted to frequently asked questions. In the event that you are unable to complete the tax return before the stipulated deadline, you can file for an extension. You will likely be asked the reason for this delay but generally, there are no issues in regards to approval. 

What Online Services are Available?

Finally, let's list some of the top online tax filing agencies in the United States (according to the latest information):

  • H&R Block
  • TurboTax
  • TaxAct
  • TaxSlayer
  • Liberty Tax

 

Please note that the information and guidance contained within this article may change from time to time. This is why it is always a good idea to speak with a qualified financial adviser if you have any additional questions or concerns.