It is impossible for the tax world to be smooth and cheerful. First, because nobody likes to have money deducted. Second, because it has complexities that are not easy to understand at first.
But do not worry. We are here to help you. We’ll simplify everything you need to know about taxes.
Taxes in the United States
For the administration and structure of federal, state and local services to function, it is necessary to pay taxes .
The US system is progressive in nature, which means that the more money you earn, the more money you will have to pay in taxes.
For the country to work, both in its administration and in the distribution of resources for works, projects and services, federal taxes work.
State Income Taxes
In most states, you must pay a tax to the state, in addition to what you already pay to the federal government. Even in some regions local taxes are charged. If you want to celebrate or envy those who don’t pay state taxes on their income, it’s Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming .
Apart from the deduction made on your income, there is also the so-called «sales tax». It also varies in its conditions and percentages depending on the location you are in.
The average of this tax is between 5% and 8.75%. Alaska, Delaware, Montana, New Hampshire, and Oregon do not charge this tax.
Also consider that your employer will withhold 6.2% of your salary for social security and 1.45% for Medicare.
Social Security tax is levied on both employers and employees to raise funds for the Social Security program. This tax is collected as a tax on your wages under the mandate of the Federal Social Security Tax Act (FICA) or as a tax on self-employment based on the guidelines of the Law of Social Security. Self-Employment Contributions (SECA).
When do you have to send the declaration?
The United States government is particularly rigorous with the payment of taxes. Every year, April 15, is the deadline for paying taxes in the country, so mark it in red on your calendar or diary.
Did you know what? There is almost never a penalty for not filing your return, in cases where you are due a refund. That said, if you wait too long to file your return or request your refund, you risk losing your refund .
Who must file a tax return?
Who should send it?
Every citizen or resident (temporary or permanent) who generates income has the duty to pay taxes. If you have been living in the United States for more than 180 days in a row, regardless of the status of your visa or permit, you have the duty to pay taxes.
In the eyes of the IRS, if those 180 days have passed in a row and you are still in the country, you are considered a resident and therefore have to pay taxes on the money you have received.
Who should NOT send it
You may not have to file federal taxes if your income is less than the minimum amount stipulated as the standard deduction.
In 2019, you do not need to file a tax return if you meet the following requirements:
- You are under 65 years old
- You do not have special circumstances that require you to file (such as income from your own employment)
- Earned less than $12,200 in income (the amount is the standard deduction for an individual)
If you are self-employed, you need to file a return regardless of your income.
What you need to know: Every time you prepare your tax return, make sure that your adviser knows all the news about the process.
What to know about the tax return
Very similar to how the tax systems work in several countries, each month you must make a calculation of the withholdings that you must pay, together with your employer.
We recommend that you look for the person in charge of the administration of your company or someone from the personnel service and immediately ask how to comply with this requirement that is parallel to the annual declaration.
The key to taxes is in the amount of income generated. The rates are usually variable and change according to the state and current legislation. For this reason, we suggest that this information be the first to be clarified with the office or advisor who is helping you complete the procedure.
Deductions are arguments that one shows the government to subtract the amount of what is paid through rebates. For example, some of the deductions are:
- The number of family members;
- Payment of state taxes;
- Mortgage interest;
- Medical expenses;
- Loss on investments;
- Tuition payment;
- Interest on educational loans.
To get a tax credit or income tax refund, you’ll need to file a tax return.
Don’t worry if you don’t fully understand the terminology, the point of all this is to help you save and get the most out of your money while meeting your tax responsibilities.
Rules and changes in the process
Take into account that if you make declarations in detail, you must review each category very carefully, since there are new rules and changes in the procedure.
Here some examples:
- The total deduction for state and local income, sales, and property taxes is now capped at $10,000.
- Interest on a mortgage loan is now deductible only if you use the money to build or remodel your home.
- Some items are no longer deductible, such as moving expenses, tax preparation fees and work expenses.
- We suggest you review the tax reform page for details.
What you should know: It is important that you check what the current year formats are, as laws and documents change regularly.
Steps to follow to prepare a tax return
1. Get the following documents:
- A W 2 form issued by your employer More information here .
- Income and interest statements. They are the 1099 and 1099 INT forms.
- Proof of health insurance coverage. More information here .
- Any donation or charity receipts, medical and business expenses.
2. Determine your marital status and calculate how much you contribute to support the home. More information here .
3. Check if you qualify for free tax preparation. More information here
4. Decide how you plan to make your statement:
5. Calculate your taxes, credits and deductions. More information here .
6. Determine if you must pay quarterly taxes, due to income that is not subject to withholding, such as self-employment. More information here .
In either case, we highly recommend contacting the IRS to cover any details that are not fully understood. Contact information here .