Here Are Seven
Commonly Asked Questions About Tax
Taxes are confusing, frustrating, and downright annoying. There are enough procedures, forms, and requirements to make anybody’s head spin. If you’re like most people, you have many questions about how tax works and why some things are the way they are. Here are some of them and their hopefully satisfactory answers.
What’s the Point Of Paying Tax?
At some point, every taxpayer pauses to ask herself this question. Handing over huge chunks of your income to the IRS may feel like robbery. But then, taxes pay for programs and services offered by the government. They sponsor the police force, fund Medicare, education, and social infrastructure.
What Happens If You Miss Tax Day?
Tax Day occurs at the same time every year — April 15th. If you miss it, you may get slapped with a failure-to-file charge. The penalty is 5% of your unpaid tax for every month you don’t file. It’s much more severe than the failure-to-pay charge you get when you file, but don’t pay. It’s much more affordable to file on time.
What Happens If You Can’t Pay Your Tax?
As already discussed, you’ll be slapped with a failure-to-pay charge, which is between 0.25% to 1% of your unpaid tax. If you can’t pay your owed tax, you can set up a payment arrangement with the IRS. It’s a proactive approach that protects you from dealing with the enforced collections.
Do You Have to File Taxes If You Don’t Make Much?
It depends on how much you make. Individuals who make less than the minimum income requirement don’t have to file. Many factors affect your minimum income requirement, including your filing status, age, and the age of your partner. The minimal required amount changes every year, so you should check to make sure. Also, it’s still a good idea to file your taxes because you may be entitled to some refunds.
How Do You Avoid Getting Audited?
Simple, pay your tax. Following the IRS rules can keep you on the straight and narrow and off their radar. Households with a modest annual income of less than $200,000 have about a 1% chance of getting audited. However, the probability jumps the higher your annual income. One factor responsible is that high earners tend to engage in dubious acts like excessive charity donations and ‘generous’ expenses.
How Come the Wealthy Pay Fewer Taxes Than Regular Earners?
This question has stirred up a lot of controversies. Wealthy people pay less tax because of several deductions, tax exemptions, and loopholes in the system. For example, if you made $500,000 a year, but your property gets destroyed, you’d owe a low-income tax — that income tax is a percentage of your earnings. They also claim deductions on charitable donations and foreign tax credits. All these loopholes are mostly inaccessible to average earners, so they can’t take advantage of them.
How Long Does It Take to Get A Tax Refund?
The IRS usually issues a refund 21 days after your returns are filed and accepted. But then, it may take longer if your returns require additional reviews. You can shorten the wait by dotting every I and crossing every T on your tax return. It also helps to have a CPA look over it. You can hire a qualified CPA at Taxfyle. If you’re claiming Earned Income Tax Credit, you won’t get your refund until mid-February next year.