Table of Contents
Chapter 1: Manage Your Taxes
Chapter 2: Estimated Tax Payments
Chapter 3: Capital Gains Tax
Chapter 4: Tax Planning & Filing Your Taxes
Chapter 5: Lowering Your Tax Liability
Chapter 6: Tips for the First Time Tax Payer
Understanding taxes
Individuals and organizations need to pay a percentage of their incomes as taxes to the local, state or the federal governments. These tax payments are, in turn, used by the government for national security and development of facilities like roads, schools, hospitals, national parks and much more.
When you make a financial plan to save money, you must consider saving on your taxes. Although you cannot completely escape from paying taxes to the government, you can use certain tax planning strategies and tips to reduce the burden of tax.
By understanding the essentials of taxation, you can save more of your hard-earned money instead of giving it to the government for no interest. Whether you are filing the returns for the first time or for the umpteenth time, there are a few tax basics and tips you must always remember. If you are not comfortable handling your taxes, there is no harm in hiring a tax attorney or a tax preparer who can make your life easy.
Understanding the fundamentals of taxation can make the process of tax planning and filing a lot less scary. It is important to understand the essentials of taxation as you are legally responsible to pay tax and can manage your finances in a better way.
Basics of Taxes
The tax laws are made by the congress, while the Internal Revenue Service (IRS) is responsible for executing them. After processing the returns and refunds of the tax money, the IRS gives the remaining tax collections to the treasury department, which in turn transfers it to the government for various projects and ongoing public expenses.
Here are a few things you should know to understand how the tax system works.
- If You Have Income Pay Your Tax – Whether you are an individual, a profit-bearing or a non-profit organization, you have to pay a certain amount of tax based on your income.
- Tax is Calculated On Your Total Income – Your entire income – from your job and your investment, is considered for calculating taxes.
- Pay Taxes All Through The Year – Your income tax is collected directly through your employer who deducts it from your pay. If, by the end of financial year, you have paid excess tax, you will get a refund. But if you have not paid enough, you will have to pay the shortfall.
- Progressive Tax System – The tax system in the United States is progressive, which means that if your income is higher, your tax rate will also be higher, and you’ll have a lower tax rate if you have a lower income.
- Voluntary Tax System – Voluntary tax system is only to allow you to manage your finances to take advantage of the tax benefits and not to decide whether or not to pay taxes.
Next: Estimated Tax Payments
