Tax Returns
Taxes are the taxes that the U.S. government charges people for work performed, regardless of legal status. These taxes are progressive, meaning that higher rates are levied on people who earn more and lower rates are levied on those who earn less.
Federal income tax is imposed not only on individuals, but also on corporations, small businesses, trusts and other profit-making forms, including self-employed individuals or independent contractors. Capital gains, hourly wages, fees, and all the various types of taxpayer income are grouped together for federal income tax reporting.
How do taxes work in the United States?
Income tax is collected directly from each person’s wages. The amount deducted depends on the employee’s instructions when filing their W4 form for their employer.
At the end of each tax year, taxpayers receive a W2 form. Earnings are calculated there and taxes are filed with the IRS based on that information. If you are a taxpayer and are self-employed, you must also file your taxes.
Who has to pay taxes in the United States?
Any person, company, business or self-employed person who has generated income or profit during a tax year must file their federal income taxes with the IRS. Taxes are also filed on trusts, estates, inheritances, interest, investments, lottery winnings, unemployment benefits and other forms of income. To file taxes, you must use a taxpayer identification number: the Social Security Number (SSN) or the Individual Taxpayer Identification Number (ITIN).
Both U.S. citizens (by birth or naturalized) and resident aliens and nonresident aliens qualify as taxpayers.
What is the difference between state and federal income taxes?
Federal income tax is levied on everyone who has earned a minimum amount of money to meet this tax obligation. State income tax can be calculated at the same time as federal income tax, but is paid separately and the rules vary by state.
– Federal tax is reported to the IRS and state tax is filed and paid to your state’s tax office. The following states do not require income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. But their residents must file federal taxes.
– Federal income tax has different rates for calculating it, and it depends on how much money you have earned in a year. States have varying rates and other single percentages that do not change. States with single tax rates are: Colorado, Illinois, Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah.
When is the tax return due?
The Internal Revenue Service (IRS) is the agency that receives tax returns from taxpayers who have fiscal responsibility in the USA.
The deadline to file tax returns is April 18 for most individual taxpayers. Entities have a date between March and April, which means that the time frame for filing is limited.
– March 15: Declaration of partnerships (Form 1065) and S Corporations (Form 1120-S).
– April 18: C Corporation Return (Form 1120) and Estate and Trust Returns (Form 1041).
If you need more time to prepare and file your return, you can request a 6-month extension which must be sent before April 18. If the request is sent after this date, it will not be valid. If you request an extension, it is recommended that you pay the estimated income tax to avoid penalties and interest.
How are taxes paid in the United States?
Once you have filed your taxes you will know if you will receive a refund or if you have to pay the difference to the IRS or your state.
Payment can be made online when you submit your tax return, with a debit or credit card. You can also send a check by regular mail, pay by phone and with your cell phone. It is important to use official IRS means.
What happens if you do not file or pay taxes in the United States?
Filing a return is one thing and paying is another, in both cases you are subject to penalties. Fines can be for any possible combination of: not filing, not paying, filing late or paying incompletely:
· For filing taxes late: 5% of the amount owed that was not paid per month. The maximum penalty is 25%.
· For not paying taxes, but you did file the return: between 0.5% and 1% of the taxes that were not paid per month.
· If you did not file your taxes or pay them: the penalty is 5% per month.
· If you filed your tax return late (more than 60 days): the minimum penalty is $135 or 100% of what you owe.
It is important to know that if you requested an extension to file your taxes and paid at least 90% of what you will have to pay, you will not be charged a penalty.
If you cannot pay the IRS what you owe, you have 3 options:
1. Make a payment agreement: if you choose this option, you will be paying your debt plus monthly interest (for no more than 36 months or three years) until the debt is paid in full.
2. Temporary deferment of collection action.
3. Offer in compromise: if it is considered that you will never be able to pay, the IRS could forgive your debt. They will carefully examine your case.
These last two options have specific conditions for acceptance, so we recommend that you consult with a tax professional to study your case.
