A Guide To Paying Tax In The US

Introduction

Most of us dread tax season when it rolls around. Doing your own taxes is a chore, especially if it’s your first time or you’ve found yourself in a new financial situation lately. That’s why we’ve written this short guide where you’ll find information on tax filing deadlines, how you file a federal tax return with step-by-step guidance, how unemployment benefits factor in, and how you can apply for a deadline extension.

We’ve focused on federal taxes because any taxes paid to your state will differ in terms of contributions and the exact methods of filing them. The main tax difference between states is their positions on income tax. Some of them have flat tax rates while others have a progressive tax system like federal taxes. Some states don’t even have income taxes. Here’s a rundown of states by income tax rates.

The Tax Filing Deadline

Before we talk about filing tax returns, you need to understand that there is a deadline. Tax Day typically falls on or sometime after the 15th of April.

That said, in 2020 it was pushed back to the 15th of July due to the economic realities of the pandemic and in 2021, it was pushed back to May 17th. Texas, Oklahoma, and Louisiana’s tax days were pushed back further to June 15th, too.

Next year, Tax Day is back at its usual spot. It’s currently estimated to be the first Monday after the 15th of April, which is the 22nd of April. If certain lockdown measures or economic shake-ups occur, you can expect that date to be pushed back next year. We’d advise you to get your filings in order before April just in case!

The federal tax filing deadline does not extend to your state or local tax returns. Make sure you file all of your taxes on time by checking which dates you need to beat. When you miss a tax deadline by not filing or paying your taxes on time, you’ll be charged interest and penalties for late payment. If you are due a refund, you won’t get a penalty for filing your tax return late.

Filing A Federal Income Tax Return

So, let’s say Tax Day is looming and you want to beat it. The best thing you can do is send off your tax returns at the very start of tax season. In 2021, you could send tax returns to the IRS as early as February 12th and a similar timeframe will be available next year. This is called tax season and it’s a good idea to submit your filings as soon as possible. If everything is cleared up by March, you’re in a good position.

Remember that you’ll need to calculate your earnings and decide on whether you want a standard deduction or an itemized return. That takes time, so make sure you have all your ducks in a row before tax season even begins.

With that covered, here’s a point-by-point list of what you should do to pay your taxes:

Decide if you’re going to choose an itemized return or a standard deduction. You can wait until after step 3 if you want to see your tax contributions first.

Get your paperwork in order, which means:

W-2 forms from your employer(s).

Earning and interest statements, such as 1099 or 1099-INT forms.

Receipts for any donations or expenses (business, medical, etc.) if you are itemizing your return.

You’ll be required to select a filing status, mainly whether you’re single or married. Your household expenses are also factored into your filing status.

Decide how you’ll file the taxes. You can mail them off or use software to file them through the Internet, which the IRS calls the most convenient and accurate return method.

You may owe money; in which case you should apply for a payment plan to make up for the difference.

File the taxes by the year’s tax season deadline.

Unemployment Benefits & Economic Impact Payments

After the circumstances of last year, many citizens will want to know where they stand when it comes to unemployment benefits or economic impact payments, and how they factor into your tax situation.

The pandemic saw many people receiving economic impact payments or EIP, and the silver lining is that it’s not considered taxable income by the IRS. This means they do not need to be reported or paid off with your tax return.

Make sure you received all of your EIPs if you require them. If you missed your stimulus payments for whatever reason, you should file a recovery rebate credit with your tax filings and receive the EIP through reduced tax bills or a refund.

As for unemployment benefits, they do come under federal taxable income. In that case, you should get a 1099-G form that breaks down your unemployment from that year and gives you the figures you need to report this funding on your tax return.

Getting A Tax Filing Extension

If you cannot meet the mandated tax filing deadline for any reason, you can apply for an extension with the IRS. This extension will last six months but you still need to pay taxes by the deadline. Avoid penalties by estimating your payment amount by the tax deadline. If you overpaid, you can get a refund after your tax returns reveal that you didn’t owe as much.

Getting Help From The IRS

Even with the help of the Internet, the US tax system is very complex and busy. The IRS recommends that you look up any burning questions you have, which is likely what you’ve done to land on this very page!

That said, you can call the IRS if you want a specific question answered. Unfortunately, contacting representatives of these big systems can take a long time, so expect to be put on hold a lot.

How To Protect Yourself From Tax-Related Identity Theft

To finish off our guide on paying taxes, let’s make sure somebody else isn’t filing tax returns in your name.

Tax-related identity theft is where somebody acquires your financial information and uses it to submit tax returns in your name. Once those taxes are filed, the fraudster then applies for a tax refund and gets it, taking money that would otherwise be landing in your wallet.

The fake tax filer will need your social security number to pull this off, so keep your social security card under lock and key. Keep it at home and keep the number private, only divulging it when absolutely necessary. For good measure, keep all of your financial information private and shred bank and tax documents when they become useless.

On a more practical level, you should lock your mailbox to avoid letters getting swiped that could have your details on them. For your computer technology, you should stay safe from viruses and spam messages intended to get your information.

The IRS themselves offer an Identity Protection PIN. The only entities that know this PIN are you and the IRS, so they can use this code to confirm your identity when you file taxes.

The IP PIN is an opt-in program, so all you need to do is use the IRS’ “Get an IP PIN” tool. You may need to create an account on IRS.gov to do that. Then you must go through their secure access authentication process to validate your identity. After that, you’ll get a new IP PIN every year through the same method or through letters.