Tax

Dealing With Your Taxes

By Investor / Published on Friday, 03 Feb 2017 06:08 AM

Introduction

The history of taxation in America dates back to the British colonial era, when the Americans were taxed on every consumer good. This trend continued even after independence with the new American government placing customs and excise taxes on the same goods that were previously taxed by the colonial government. Taxation continued to evolve as legislations, such as the Tax Act of 1862, evolved. This saw the establishment of the office of commissioner of internal revenue, whose mandate was to levy and collect taxes. The Income Tax Act of 1894, which became part of the US government in 1913, gave the government the power to levy and collect taxes on incomes. The collected taxes are used to run the government by paying salaries of the civil servants and fueling the development of the country.

Taxes and how they work

The federal government is mandated by law to collect taxes from its citizens wherever they may be. The law on taxation gives a clear guideline on how much tax one should pay. This is determined by how much they earn and a certain percentage of the total income, which is considered to be the tax owed. The Internal Revenue Service AKA IRS is the body mandated by the federal government to collect taxes and impose any penalties deemed proper, in case of tax default cases.

Custom duty is another form of tax that the government collects and is imposed on imported goods, which seek the United States markets unless the goods are duty exempted. Once collected, the taxes are used for many purposes, such as running the federal education program, welfare programs, the U.S military and many other agencies.

Filing taxes

The process of filing taxes is mandatory for all American citizens. This is very evident on the month of April as many people rush to file the taxes before the deadline of 15th, though tax collection runs throughout the year. The process of tax filing begins when you fill the W-4 form, a miniature income tax survey. This form has information on the your marital status, dependents such as children and so on, all of which are factored in for determining how much income tax you are mandated to pay.

This is to ensure that none pays too much or too little income tax. The W-2 tax form breaks down the amount of tax you payed to the federal government during that year and the employer is mandated to issue such forms to you. And if you had more than one job, it’s likely that you might receive more than one W-2 form. Other forms include the 1040’s income tax return form, which covers tax returns for close to the whole bracket of people living in the US, both residents and non-residents.

How to pay taxes

There are several steps followed when calculating the amount of tax that any US citizen is required to pay. They all begin by getting the gross income of the individual and deducting the adjustments to get the adjusted gross income (AGI). Standard deductions or itemized deductions and personal exemptions are then further deducted from the AGI to get the taxable income. The taxable income is then subjected to the tax rate to come up with the Gross Tax Liability, from which credits are deducted to obtain the Net Tax. The employer then withholds the income tax to itself on behalf of the state as mandated by the law. The employer then deposits the withheld income tax in Federal Reserve Bank.

How much does one owe the IRS

United States citizens can easily know how much they owe the IRS by calculating the net tax they are supposed to pay. This is because some individuals fail to  pay the taxes or file their tax returns that the state owes them in the future. The unpaid taxes usually have some accumulated interest and penalties. So you can calculate the tax using tax preparation software so as to know the total amount due for payment to the IRS. It is also prudent to contact the IRS before you pay so that they may confirm the exact amounts that they owe you.

Time taken to get tax returns

The IRS states that 9 out of every 10 e-filled tax returns are processed within 21 days of IRS e-file acceptance. The IRS processing time for refunds of mailed papers is estimated to be between 6 to 8 weeks from the date IRS received tax returns. This happens within a period of 1 to 2 months from the time the IRS is able to receive citizens’ tax returns filed online or through filling the forms manually. Later, the IRS refunds the tax overcharged to individuals.

Conclusion

Paying taxes is a mandatory requirement for all citizens and all should do so within the stipulated period of time to avoid any cases of penalties or other tough measures from being taken against them.

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