what is are taxes
What are taxes? When do I need to pay them? And why do I need to pay them?
Every year around April 15th, you'll hear adults of all ages groan about “tax day." That's because federal and state income tax forms are due around that time, and Uncle Sam is ready to collect his coin.
Federal Income Taxes
Collected by the US government to pay US government bills.
State Income Taxes
Collected by individual state governments to pay their individual bills.
Each year when “tax day" rolls around, adults of all ages must report their income to the IRS, using special tax forms. There are many laws that set forth complicated rules about how much tax is owed and what kinds of special expenses can be used (“written off") to lower the amount of taxes you need to pay.For the average worker, tax money has been withheld from paychecks throughout the year. On “tax day," each worker reports his or her income and expenses to the IRS.
How do I file my taxes?
The IRS needs to know exactly who's filing and who is covered in your tax return. To do this, you will need social security numbers and dates of birth for you, your spouse, and your dependents:
"What documents do I need?"
Two forms of valid ID
Valid ID Options: Passport, Birth Certificate, License or State ID
Proof of income from your employer: W-2 forms (past and current)
If you are employed, your employer is required to give you a copy of your W2 form, even if they already have! If your boss is taking forever to give you this form, don’t worry it is their job to do so and they have to by law, so be patient.
"Well I had a job earlier this year but I quit and lost my W2 form, does that mean I can't get another one?"
No, make sure you collect your much-deserved coin and demand your W2 forms. Even if you quit or got fired, past employment is REQUIRED to give you a copy of any old W2 forms. If they are playing games with you, contact Human Resources. You can simply google your establishments " HR Department" and call them and ask them to mail you a copy.
"Alright, I got my shit. What next!?"
You can file your taxes as early as January 1st! The earlier the better but remember April 15th is the latest date that you can file.
It's recommended to start your tax return for free with a service like TurboTax online.
If you get to the end and feel confident in your own efforts, then pay for the service and file your return.
If you don't feel confident at that point, then take your information to a retail/franchise tax preparation service and compare their results with your online results.
A retail/franchise tax preparation service is one of those companies like H&R Block or Liberty Tax.
They usually have the guy dressed as the statue of liberty standing outside waving a banner.
"My finances are becoming a bit more complex."
The more complex your financial situation becomes (i.e. rental properties, heavy stock trades, small business), the more likely it is that you should use a professional, like a CPA, to help you with tax planning and filing your taxes.
A CPA is a certified public accountant, they are typically used by businesses and individuals with higher incomes.
"I'm ready to file, what now?"
There are basically three major players in the tax preparation game:
Full-time certified public accountants (CPAs and Enrolled Agents) and other traditional practitioners.
According to the American Institute of CPAs, it will run you $250 per return to work with a CPA.
Retail/franchise tax preparation services (i.e. H&R Block and Liberty Tax), who may or may not employ tax practitioners.
Retail Tax Pros is $147 -$191 per return.
Do-it-yourself tax software (i.e. TurboTax).
According to TurboTax, and H&R Block's website, Tax Software will cost between $35- $100 per return.