I’ve never been told when to do my taxes. Or how. Or why. Or even what taxes are. But if I get it wrong, I go to jail.
Now this all goes for the US. I don’t know how it is in other countries.
First, if you get it wrong, you’re not that likely to go to jail. You’re much more likely to get an unpleasant and unexpected bill sometime a year or two later when the Internal Revenue Service does their own math and realizes yours was wrong. If you keep ignoring it for a year or two after THAT, they might start garnishing you paychecks or something.
So that can suck, but you aren’t actually going to go to prison.
Second, *savage muttering about public school these days.* They USED to teach this.
Third, income taxes (in the US) are a percentage of the wages of anyone working a job in the US, or who is a US citizen living abroad, that you turn over to the government. The government uses it to pay for keeping up public infrastructure like roads, funding Medicare, paying government employees, etc. etc. There are federal income taxes (aka the IRS), income taxes for the state you live in, and depending on your township, sometimes there are also local income taxes. You have to fill out a separate form for each of these.
The IRS form is easy for most people, but it can get complicated if you are self-employed, have a lot of investments, or something. Income taxes for states and localities are easier to do in some places than others, depending on how complicated they make their laws.
You do an accounting of your income taxes annually–also known as ‘filing taxes.’ It covers the period of Jan 1 to Dec 31 of the previous year, it’s due by April 15–Tax Day! (Or June 15, if you’re living abroad).
How income taxes work:
Most employers in the US actually take the money out and set it aside for you from each paycheck over the course of the year. Then, a few weeks after the end of the year, they send you documents labeled things like “W-2″ that sum up the total tax they withheld for you and lots of other information that they don’t bother explaining on the form itself. When your employer gives you these forms, then doing your taxes is usually easy and you probably won’t have to pay much if any more money to the government. However, you may get a tax return if it turns out you paid more money than you needed to (which is very common).
There are also other forms, like 1099 forms which sum up your additional income from bank account interest, stock dividends, etc. and 1098 forms, which track how much interest you paid on college loans in the past year–which you can deduct from the total you owe for taxes.
It can take a month or so for all the forms to get to you, depending on your employer. Also, some of these forms don’t get mailed out anymore; instead you access them online by logging into online portals for your bank, college, etc.
If for some reason you can’t get your taxes done by April 15, you can file for an extension to have your deadline pushed back.
If for some reason your employer does not set aside your taxes over the course of the year, then you need to set that money aside! Otherwise it will TOTALLY SUCK because you may suddenly be stuck owing a few thousand dollars to the government that you didn’t save up for.
You may have heard of people getting paid “under the table.” This means that your employer is not reporting your income to the IRS. This means that, theoretically, you could just…not report the income either. Assuming you are okay with breaking the law, and with taking a risk should the IRS ever decide to audit you.
If you make an income that falls below the poverty level, then you probably also won’t owe anything, and will most likely get money back.
If you don’t have any income from the previous year or your income was only something like Social Security or disability, YOU STILL HAVE TO FILE TAXES.
If you own your own business or a farm or you do freelance work or something like that and you don’t know how to do your taxes…visit an accountant immediately for advice. This stuff gets confusing as hell.
Also, if you are an artist who sometimes takes commissions online or writes fanfic for money or any of that jazz…you are IN FACT self-employed and you SHOULD be documenting that income and reporting it and paying taxes on it. There are an awful lot of people who don’t do this. If you choose to continue not to do it now that I’ve warned you, on your own head be it.
But even if you don’t do your taxes and they catch you, you still probably won’t be arrested. They’re much more likely to audit you and make you WISH they’d just put you in jail, and charge you for what you owe at the end.
(Also, if you are making income as an artist or something, you can deduct the expenses you pay for your tools and equipment! That can be pretty cool–but you need to save those receipts when you buy things you’ll use for your work so that you can add them all up at the end of the year and prove you bought them.)
What is an audit?
An audit is where government representative comes in, goes through your financial records, and does a detailed review of typically the past three years of your financial and tax history. At the end, they give you a paper to sign off on if you agree with their findings, or you can contest them if you don’t.
The punishment for being audited is being audited. You won’t go to prison (unless you’re getting income from selling drugs or something of course), but if they decide that you owe money you didn’t report, you may get billed for it.
Where to find tax forms & info:
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