Virtually all U.S. residents are required to file taxes with the Internal Revenue Service (IRS) each year, but the process can be quite intimidating for many. A taxpayer either owes additional taxes for the prior year or is eligible for a refund, or “tax return,” depending on the amount of money withheld from one’s paycheck and several other variables.
The Tax System
The Internal Revenue Code (IRC) is the section of the law that contains all the all of the statutes relating to taxes. Congress, in their authority as the legislative branch of the government, writes and amends these laws. They direct the processes for the collection of taxes, enforcement of rules, and the issuance of tax refunds. The Internal Revenue Service (IRS) is the government agency within the U.S. Department of Treasury responsible for carrying out these functions.
The IRS issues notices regarding its interpretation of the tax code and offers guidance through notices and statements. Although the IRS may offer interpretations disputes that cannot be resolved are ultimately decided by the federal court system exercising its power as the judicial branch of the government to interpret the laws.
Personal Income Tax
Nearly all U.S. residents are required to pay taxes on their personal income every year. Personal income taxes fund programs and services such as schools, roads, national security, and the welfare system. An employer will typically have an obligation to withhold income taxes from their employee’s pay. Because the self-employed do not have taxes withheld they may pay estimated taxes throughout the year, or pay their taxes in full when filing in the spring.
Income taxes must be paid on many kinds of earnings including wages, salaries, tips, commissions, business income, rents, dividends, alimony, capital gains, IRA distributions, unemployment benefits, and Social Security benefits. The amount of tax to be paid is determined by the overall amount of income. Those who earn very little may not have to pay taxes at all, while higher earners may be liable to pay for a larger percentage of their income.
Reducing Your Tax Liability
Following the links in this section you can find many strategies for reducing your tax liability. However, there are two fairly standard methods of reducing your tax burden that require little or no preparation or planning; namely tax deductions and credits.
Tax deductions reduce the overall taxable income for an individual. Taxpayers may choose to accept a standard deduction or make itemized deductions. Commonly deductible expenses include student loan interest, college tuition, medical and dental costs, mortgage points, mortgage interest, theft or casualty losses, property taxes, state income taxes, charitable contributions, and home office expenses.
Tax credits are another common method to reduce your tax burden. Commonly available tax credits include earned income credit, first-time homebuyer credit, child and dependent care credit, adoption credit, Hope and Lifetime Learning credit, credit for the elderly and disabled, and retirement savings contributions credits.
Filing Your Federal Taxes: In-Depth
Let’s be honest, filing your taxes is a complicated and time-consuming process. One of the reasons why is because of the lack of easily accessible and reliable information about current tax laws and procedures. Just knowing where to start can be a challenge.
Deductions and Tax Exemptions
Depending on who you are and what you do, you may be eligible for any number of tax deductions and exemptions to reduce your taxable income. You should consult with a tax attorney about what deductions and exemptions to take if you have questions about them. Ultimately, these could have a significant impact on your tax exposure. Starting with the standard deduction, the links below will help you determine how to shrink your income for taxes…
- The Standard Deduction
- Who Should Itemize?
- List of Itemized Deductions (IRS)
- Tax Breaks Every Parent Should Know About
- Top Seven Tax Deductions for Seniors and Retirees
- Top Ten Tax Deductions for Landlords
- Best Tax Deductions for Professionals
- Tax Exemptions (IRS)
- Checklist: Non-Deductible Expenses
Common Tax Credits
Tax credits are also another way to reduce your tax exposure and possibly obtain a tax refund when the dust settles. Check out the links below to learn more.
- Earned Income Tax Credit – Do You Qualify? (IRS)
- Earned Income Tax Credit Publications, Forms, and More (IRS)
- Child Tax Credits (IRS)
- Child Tax Credit publication (IRS)
Filing Taxes from Outside the U.S.
In this increasingly globalized world, it’s not surprising to find yourself living abroad for business or personal reasons, or simply for pleasure. Those serving in the military also find themselves living in other countries at one time or another due to their service obligations. There are also those who have immigrated to, and worked in, the U.S. at one time or another who may have questions about filing taxes in the U.S. The resources below can help to answer many of these questions.
- Taxes for U.S. Citizens and Resident Aliens Abroad (IRS)
- Immigration and Taxes: Who Has to Pay U.S. Taxes?
Extensions and Filing Late
There are many reasons why you might need a filing extension for your taxes. Perhaps you’ve been waiting on records from multiple employers or maybe you had a significant personal event that has consumed your focus. Whatever the reason, the links below will help you understand what is required to extend your tax deadline.
- Did You Know…? Filing a Tax Extension
- Extension of Time to File Your Tax Return (IRS)
- Application for Automatic Extension of Time to File (IRS) [PDF]
- Filing Late Returns FAQ
Free Consultation with a Utah Tax Attorney
When you have a tax law issue you need help with, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506