Taxes might seem intimidating and confusing, but they’re actually pretty simple when you break them down. Every time you earn money, buy something, or own property, a small part of that money goes to the government. But why?
Some people get money back when they file taxes, while others might owe more. Knowing how taxes work can help you keep more of your money and avoid surprises. In this guide, we’ll explain everything in easy terms—what taxes are, why we pay them, when they’re due, and how you might even get a refund. Let’s dive in!
How Do Taxes Work?
Taxes are money that people and businesses pay to the government. The government uses this money to pay for things like schools, roads, police, and firefighters. When you make money, buy things, or own property, you may have to pay taxes.
Why Do Taxes Exist?
Taxes help pay for important things that everyone needs. Without taxes, we wouldn’t have safe roads, schools, hospitals, or emergency services. The government collects taxes to make sure our country runs smoothly.
Are Taxes Voluntary?
No, taxes are not voluntary. If you earn money or own certain things, you must pay taxes. If you do not pay, you could get in trouble with the government. Some taxes, like sales tax, are taken when you buy things, while others, like income tax, must be reported and paid each year.
When Does Tax Season Start?
Tax season starts every start of the year, in January. This is when people start getting their tax forms and can begin preparing to file their taxes.
When Are Taxes Due?
Taxes are usually due on April 15. If this date falls on a weekend or holiday, the deadline may change a little. If you need more time, you can ask for an extension, but you still have to pay what you owe by the deadline.
What Types of Taxes Are There?
There are many types of taxes, including:
- Income Tax: A tax on the money you earn from work or investments.
- Sales Tax: A tax added to things you buy, like clothes and food.
- Property Tax: A tax on houses, land, or buildings that you own.
- Payroll Tax: A tax taken from your paycheck to help pay for programs like Social Security and Medicare.
- Excise Tax: A tax on specific goods like gasoline, cigarettes, and alcohol.
What Are ‘Withholdings’ and Other Tax Terms I Should Know?
- Withholdings: Money taken from your paycheck for taxes before you even get paid.
- W-2 Form: A paper that shows how much money you made and how much tax was taken out.
- Tax Return: The forms you fill out to report your income and figure out if you owe money or get a refund.
- Tax Deduction: An expense that reduces how much tax you have to pay.
- Tax Credit: A dollar-for-dollar reduction in the tax you owe, sometimes leading to a refund.
What Kind of Taxes Do You Get Back?
If you paid too much tax during the year, you may get a refund when you file your taxes. Common reasons for refunds include:
- Too much tax withheld from your paycheck
- Earned Income Tax Credit (EITC) for lower-income workers
- Child Tax Credit for families with kids
- Education credits for school expenses
What Are Taxes Used For?
The government uses tax money for things that help everyone, including:
- Schools and education
- Roads and transportation
- Police, firefighters, and emergency services
- Military and national defense
- Health programs like Medicare and Medicaid
Final Words
Taxes are an important part of life. They help pay for things we all use, like roads, schools, and hospitals. Even though no one likes paying taxes, they help make sure our communities and country run smoothly. Understanding how taxes work can help you plan and make sure you pay the right amount—and maybe even get some money back!
Of course, if you need help navigating your taxes and finances Strategix is here to give you a lending hand. Fill out our form and one of our local tax experts will give you a call.
