Taxes are one of those things that confound many people. It's easy to get lost trying to make sense of taxes, so we wanted to simplify things to make your life easier. Today, we're presenting you with a brief guide to understanding your taxes.
Soon, you will have a clearer picture of what goes into taxes and how you can get assistance handling your tax-related matters.
Taxes: What Are They?
The term "taxes" refers to government-collected money. This money is then used for sustaining and improving government functions. If you've paid close attention to your pay stubs and tax paperwork, you've likely noticed that different taxes are automatically deducted from your paycheck.
What's more, Americans today pay several types of taxes that range from income taxes to estate taxes and much more. There are differing opinions regarding how much should go toward taxes. Some people believe taxes should be relatively high in order to sufficiently pay for things like new roads, the education system, and so on.
Others are in the mindset that higher taxes cause the economy to become stagnant. But regardless of where you stand on proper tax distribution, everyone ultimately ends up paying for things they don't use. This is hard for some taxpayers to come to terms with. But it's the system on which taxes operate and is necessary to ensure the needs of others are covered.
That's why you notice taxes taken from every paycheck you make. While it might seem unfair to have your hard-earned income reduced by taxes, the country has numerous obligations and programs that require everyone to pitch in to make work.
The good news is that most people get a portion of these deductions back every tax season. It's important that you file your taxes correctly and accurately to ensure that you get the most back in your tax return.
If you struggle with filing your taxes, it's important that you hire a dedicated tax firm like Coast One to assist you. With experienced tax specialists in your corner, you can ensure that nothing gets overlooked and that your taxes are filed properly.
Does Everyone Pay Taxes?
Ideally, yes. However, some people work "under the table," where their employer doesn't report the necessary tax withholdings in an effort to save money. This is illegal and only serves to put more tax burden on the honest taxpayers of the country.
Moreover, some people don't work at all. Therefore, there's no way to deduct their tax obligations from them. But those who do work honest jobs will have taxes regularly deducted from their paychecks. What's more, the employers of taxpayers are also responsible for paying taxes.
But taxation doesn't just go toward maintaining roads and physical buildings. Taxes also help pay for your Social Security so that you can retire with savings to live on when you're no longer working. The same is true for programs like Medicare.
Your tax obligations help make the difference between someone receiving medical attention when they need it and going without it.
Types of Taxes
There are two types of primary taxes: direct and indirect. Direct taxes are those that come out of your paycheck and go straight to the government. These include:
- Corporate taxes
- Property taxes
- Income taxes
Moreover, direct taxes are determined according to the value of what's being taxed. A certain percentage comes out of that amount, which is decided by federal and state law.
Indirect taxes, on the other hand, are those that you pay when you purchase certain goods and services. When you go to a hardware store and buy tools, for example, you pay a sales tax on the manufacturer's suggested retail price.
Sales taxes vary by state, but the national average is 7.00%. Some states have a much higher sales tax, such as California, which is currently at 7.25%. But there are some states that have absolutely no sales tax at all, including:
- New Hampshire
So as you can see, taxes vary wildly depending on which state you live in. And in terms of direct taxes, the rates regarding what you pay also vary by state.
It's important to understand your taxes and why you pay them. Admittedly, though, taxes aren't the easiest for many people to comprehend. There are many nuances to consider, which is why you should consider hiring a professional tax service during tax season.
A tax specialist will make sure you file correctly and work to help you get the most back on your tax return.