Do I Have To Pay Taxes?
The Internal Revenue Service helps taxpayers understand the relevance of paying taxes on time and offers several solutions if they face any trouble while paying for taxes. Taxpayers must submit within the deadline, even if they are unable to pay the full amount, they must pay the rest as soon as possible. Keep in mind that the sooner you pay, the less money you have unpaid.
In this article, we will look at :
- Some important information and answers to - Do I have to pay taxes?
- Benefits of paying your taxes on time
- Do I need to pay taxes? - Summary of taxes that you should pay:
- Why Do I Have To Pay Taxes?
- Do I need to pay taxes – Explanation on how you can Pay taxes
Some important information and answers to - Do I have to pay taxes?
Here are some important facts to know:
- It is integral to pay your taxes on time. Else, you may invite unwanted penalties from the IRS. It can impose two kinds of penalties. One penalty is for late submissions, and the other is for late payments. They can be summed up quickly and Interest will be added to the penalties
- Penalties for paying or filing your taxes late - If taxpayers file their tax returns later than 60 days late, of the stipulated time, the penalty is usually $ 210. If the unpaid tax is less than $ 210, it will be 100% of the unpaid tax. Otherwise, the penalty can be up to 5% and up to 25% of unpaid taxes each month. If the taxpayer is eligible for a refund, there is no penalty for a late submission
- Payment delay penalty - The penalty is usually half the percentage of unpaid tax per month (that is, 0.5 percent). It can account for up to 25 percent of unpaid taxes. For taxpayers who have a payment contract with the IRS, the penalty rate is halved. In this case, the rate per month is a quarter percent or 0.25 percent
- Monthly compound penalty - If both late filing and late payment penalties apply, the maximum of the two penalties is 5 percent per month
- Taxpayers are required to submit an application or apply for an extension promptly if payment of taxes within the timeline is not possible
- Taxpayers should pay as soon as possible
- The programs IRS file and FreeFile provide the fastest and easiest filing method. For 2020 returns, e-file and FreeFile will be available until fall 2021
- Always maintain a record or copy of your tax return. The first time you use a software product, you may need to pay the adjusted total income (AGI) from the previous year's tax return to verify your identity. For more information on verifying your identity and digitally signing your tax return, you can go through the IRS details and check Verifying Your Electronic Tax Return
- Consider a loan if you're unable to pay taxes on time to avoid the penalty and a hit on your credit scoring. For those who can't pay in full, it may be cheaper to take out a loan or pay by credit card than the IRS. The IRS requires taxpayers to consider their options and determine the one that best suits their financial situation
Payment options -
- Find payment options at IRS.gov/payments. The IRS Direct Pay is a great option for anyone who can pay part or all of what they owe. Individuals can use the IRS Direct Pay to pay directly from their savings/current accounts that offer a fast and free option. For those who cannot afford to pay immediately, the IRS will work with them to resolve their tax obligation
- Most people are eligible to make payment plans using the IRS.gov online payment arrangement tool. Taxpayers under $ 50,000 can typically set up a short-term payment plan for 72 months or a monthly payment arrangement
- Late payment charges or penalties won't apply for taxpayers who receive an extension of their tax return and pay most of their debt within the original deadline. They are unlikely to pay late payment penalties. To qualify, apply for an extension of 2018 by the April deadline and pay at least 90% of your total tax obligations by that date. Then, by October 15, 2019, submit the 2018 tax return and pay the remaining amount. Interest will continue to be paid on payments received after the April submission deadline
- There is no penalty charged to taxpayers who have a good reason for their delayed payment of taxes. Taxpayers are not required to pay delinquency or delinquency penalties if they can justify not submitting or paying in time. Alternatively, if they submit and pay within the recent deadline, they can qualify for the First Time Abatement program for which you can gather information, by visiting IRS.gov
Benefits of paying your taxes on time
You may wonder why do I have to pay taxes?. There are many advantages of paying your taxes on time:
- Avoid additional interest and penalties
- Avoid losing future refunds as some or all of the refunds will be used first to pay the unpaid taxes
- To secure credit. If the IRS submits a penalty to taxpayers for not paying taxes on time, it can affect their creditworthiness and credit score and make it difficult for them to obtain a loan
Do I need to pay taxes? - Summary of taxes that you should pay:
1. Taxes on What You Earn
- Individual Income Taxes
- Corporate Income Taxes
- Payroll Taxes
- Capital Gains Taxes
2. Taxes on What You Buy
- Sales Taxes
- Gross Receipts Taxes
- Value-Added Taxes
- Excise Taxes
3. Taxes on Things You Own
- Property Taxes
- Tangible Personal Property (TPP) Taxes
- Estate and Inheritance Taxes
- Wealth Taxes
Why Do I Have To Pay Taxes?
Every year around April 15th, people of all ages moan and crib about "Tax Day" wondering why do I have to pay taxes. This is because federal and state income tax forms are currently due during this time.
The United States has local, state, and national governments with a variety of parts, including legislators who enact the law, governments who enforce the law, judges, and many other civil servants who get their salaries and pays from the taxes that you pay for their work.
Taxes also take many forms: There are different types of business taxes that you may have to pay:
- Income tax
- Self-employment tax
- Estimated tax
- Employer tax
- Excise tax
Each category has special qualifications, rules, or IRS forms that you need to file diligently in the prescribed deadline and form. You can check out IRS to see which business taxes apply to you.
You may be required to withhold taxes for your employees, from their paychecks. Federal employment taxes include Social Security, income, self-employment taxes, unemployment, and Medicare. You must again check with IRS to figure out what kind of taxes you need to withhold for your employees
- If you work to make money, you pay income tax. Depending on how much money you make, a certain percentage of your money will be withheld and sent to the government
- When shopping at stores, you usually pay sales tax. This is the percentage of the cost of the item that the store charges
- If you own property, you pay property tax on the value of your property. Payment of taxes is a citizen's duty, and it is also required by law
- If you do not pay the tax, the taxing agency that is the Internal Revenue Service or IRS will require you to pay the tax or face penalties such as fines and imprisonment
The money you pay with taxes goes to many places. In addition to paying civil servants' salaries, your taxes can also help support common-pool resources such as police and fire departments. Taxpayer money will help you keep the road you travel safe and well. Taxes fund public libraries and parks. Taxes are used not only in many schools but also in funding the poor and many types of government programs that help the poor.
When a "Tax Day" occurs each year, adults of all ages are required to report their income to the IRS using a special tax form. Many laws set complex rules about the amount of tax you are incurred and what kind of special expenses you can spend to reduce the tax you are incurred (“amortization”).
For the average worker, salary is deducted as taxes throughout the year. On "Tax Day," the employer also reports to the IRS the amount paid to each employee. The IRS compares all these numbers to ensure that each person is paying the correct amount of tax.
If you have not withheld enough tax to pay the tax from your check throughout the year, you will need to deposit more money to the government. If the withheld amount from your salary exceeds the actual tax that you were supposed to pay, you will be given a check or a refund from the government.
Explanation on how you can Pay taxes
- Companies must meet their state, national, and local tax obligations to maintain good credibility and legal status
- The structure of your company and your location affect the taxes your company must pay. You can choose a calendar year as your tax year and cater to a 12-month billing cycle to be eligible to pay your taxes
- Tax laws vary by location and structure of the company, so you should check with your state or local government to understand your company's tax obligations
- The two most common types of SME state and local tax obligations are personal income tax and wage tax. Income tax obligations in states are determined by the structure of the company. For example, a company is taxed separately from its owner, but sole proprietors report personal and business income tax in the same format
- If your company has employees, you are responsible for paying state income tax. These vary from state to state but often include workers' unemployment tax, accident compensation insurance, and temporary disability insurance. You may also be responsible for withholding income tax from your employees
- Check with your state tax authorities for withholding amounts and when they will be sent to the state
- Cash stack represents personal and business taxes that represent business taxes and employee insurance paid separately by a legal entity or other company
Conclusion
Due to the pervasive nature of taxation, you may have questions like – do I have to pay taxes. Depending on your age, profession, demographic details, and income, you may have to pay taxes to the Government. They are a crucial instrument of attaining social objectives and substantial for equitably deriving revenue to lower-income groups, thereby, reducing inequalities related to income and wealth.
Taxation is an integral part of fiscal policy and is essential in stabilizing the economy. While tax increases can reduce consumption and slow the economy, tax cuts can be a mechanism to stimulate economic growth by increasing the resources available for consumption and capital investment.
Key Takeaways
- There are various kinds of taxes that you may have to pay which are used to stabilize the economy
- Taxation can encourage social and financial equity. Progressive income taxes are a boost to the economic balance and help the government to deploy better facilities, amenities, and services for its people
- Taxes are legislated to derive revenue for government operations
- Non-payment or delayed tax payments can lead to legal action in the form of a fine or imprisonment