3 Things You Should Know About Federal Taxes

Whether in business or managing your private financial affairs in the United States, it is important to have a grip on federal taxes. This will mean that you can maximise your profits or family income. Those in finance are skilled and experienced in how the tax system of America works. We should all know something about it and pick up as much information as we can to benefit. By using online tax-resolution-services you can find out more. 

In this space, we shall focus on a few of the things that we should know about taxes.

Not Everyone Pays Tax

It was interesting to learn that almost half of Americans pay no tax at all. This is because their earnings are too low to be included in the tax system. Those who fall in this category will not even have to file a federal income tax return. There are many thresholds to consider, but principally, this will apply to younger people and those new to the workforce along with those older and on Social Security Benefits.

To summarise the criteria, a person younger than 65 would have to earn $12,400 gross income before tax is payable. If you are over 65, then this is $14,050. This threshold can then double for married couples but can be different if one spouse happens to fall in one age group rather than the other. Head of a household and qualifying widows are allocated different amounts, which can all be checked online.

Also, just because you fill out a tax return does not mean that you will pay taxes. Tax deductions and credits can reduce your taxable income to below the threshold, meaning that you might receive a tax refund. So, it is worth recording everything and keeping receipts.

Tax Holidays

It is possible sometimes to take a holiday from having to pay federal income taxes. For instance, you might be able to have a break from paying sales tax. This will depend on where you live.

A sales tax holiday is defined as a period where a state (local decision) or government (national decision) either waives or reduces the sales tax on certain goods for a limited amount of time. This can be for a week or over a weekend. These holidays can be considered an annual event in many parts. The purpose of them is to resolve issues surrounding back-to-school shopping or to take account of natural events such as hurricanes that occur seasonally.

Some states have no sales tax at all, making goods cheaper to buy and a place where a business can compete better with other states on price. These states include Alaska, Oregon, Montana, Delaware, and New Hampshire. So, these represent great places to visit to pick up a bargain at any time.

Fear of Tax Audits

If you are worried about getting audited concerning your tax affairs, then don’t be, because the chance of this happening is very low. This is according to the IRS. Out of all the tax returns filed between 2010 and 2018, the IRS only audited 0.60 percent of individual returns and 0.97 percent of corporate ones. This is exceptionally low and much lower than most people would have thought. So, you should not worry about something that may not happen. 

The tax system will tend to target wealthy taxpayers with gross incomes that have been highly adjusted. You should be mindful, however, whatever your financial position, that if your tax return includes a common audit trigger or tax breaks that you are not allowed to take, you will significantly increase your chances of being audited. So, it is worth checking out just what these tax audit triggers are.

To conclude, you should be aware that there are thresholds for needing to pay federal income tax, but even when you have to, there are tax deductions and credits to take advantage of. Tax holidays can be enjoyed too, in certain parts due to seasonal events. Then, we should not fear an audit as much as we thought we had to. Nevertheless, we should still know about federal taxes, so as not to get caught out.

Posted in: Finance