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Tuesday, May 28, 2024

IRS Taxes: An Easy Guide for All Taxpayers

Established when President Lincoln held office, the IRS—Internal Revenue Service—is the governing body that administers the Internal Revenue Code of 1986 and has been an integral part of the US tax system since the 1700s. Federal taxes, also known as IRS payments, need to be filed within the disclosed dates for the processing of any tax return.

A delay in IRS payment would implicate an interest charged on every additional day taken to complete the filing. So, it’s imperative to know when the deadlines for filing the returns are.

The official IRS website is a great resource for anyone that is hoping to gain basic guidance on how the filing works. Hiring an accountant or engaging with a Tax advisor to guide you through the filing process is another way to go.

Perfunctory Things to Know About the IRS Taxes

1. IRS Free File

If you deem yourself to be a free spirit, you can choose to opt for doing your taxes by getting an application form and filing the returns. This inadvertently means that the process will run very smoothly for you. To further your lone spirit, you can choose IRS free file. This provides American citizens to file electronically. This also enables you to save an extra buck since you can initiate a direct deposit.

2. Tax Slabs

It is important to know what tax brackets are and which ones you fall into. Tax brackets are essentially slabs that determine exactly what percentage of your income should be taxed based on various personal factors like your marital status or even investments that you make. It is important to remember, that the tax bracket you fall into, is ultimately tied to the total income you earned as an individual and your financial dependency.

These slabs exist because the US government uses a Progressive Tax Structure which refers to the economic system of charging a higher tax percentage to individuals who earn more than the average earner.

3. Estimating Due Tax Amount

Taxes can be calculated by using Form W-2 which is provided to you by your employer. This form is a detailed record of what income was paid out to you by your employer over the fiscal year. It empowers you to know exactly how much you owe in taxes and how much money you are eligible to receive by way of returns.

4. The Matter of Deductions

Legal Deductions are a great way to disclose the exact amount of taxable income you have post spending your money on important commitments like health or medical bills, payments to charities or not-for-profit organisations, etc; which help you become eligible for a tax refund on such expenses/commitments.

Our government has deduction limits for such initiatives which protect up to a certain sum of your money from being taxed within the legal boundaries of the tax laws. Hence, it is great to be proactive about researching and filing for the refunds that you are eligible for.

5. Credit Where Credit is Due

Knowing which Tax credits you have at your perusal is also a great way to bring down the amount of tax you owe. While Tax deductions help in bringing down your taxable income, tax credits are direct reductions to the tax payable (amount owed) to the IRS.

A standard example for understanding how tax credits work are the Additional Child Tax Credit which helps you claim credit for some expenses that are incurred due to having a dependent (child/children). It is often advised to consult Tax advisors about determining and disclosing tax credit eligibility as it can sometimes be slightly complex and requires more forms to be filled out.

6. Completing Tax Payment

The payment of your tax can take place through an electronic transfer of funds by using your debit or credit card or by mail through a cashier’s check, money order or personal check addressed to the “U.S. Treasury”. With this option of using the mail, it is important to include the below information along the check:

  • Your name and address
  • Daytime phone number
  • Social Security number (the SSN shown first if it’s a joint return) or employer identification number
  • Tax year
  • Related tax form or notice number

A more traditional approach would be to pay the tax in cash with any IRS retail partners in your locality.

7. The Refunds Process

Tax refunds are often processed within 21 days of filing along with the receipt when filed electronically. Certain incomes that are filed, may require a manual audit which can sometimes delay the return processing slightly. This could be due to a requirement of correspondence with the taxpayer/filer by the IRS staff, seeking clarity on any details.

Additionally, it is also important to know about the legal requirements around the payout of refunds or processing of tax credits. For example, the Additional Child Tax credit benefit can only be paid out post-mid-February even if the filing has been completed earlier.

Final Thoughts

As a tax-paying citizen, you should know that the IRS provides all types of support to insure that filing and payment of taxes is an easy process. You can always reach out to IRS customer support via a phone call or even face to face by visiting an IRS office near you when you have a query. Extensions on IRS estimated tax payment dates can be automatically and instantly granted when a request for such an extension is submitted on the official IRS website. The IRS is also flexible in helping establish a payment plan for parties that need additional assistance and extensions to pay the taxes owed.

Ahsan Khan
Ahsan Khan
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