Created by FindLaw's team of legal writers and editors | Last reviewed June 20, 2016
Virtually all U.S. residents are required to file taxes with the Internal Revenue Service (IRS) each year, but the process can be quite intimidating for many. A taxpayer either owes additional taxes for the prior year or is eligible for a refund, or "tax return," depending on the amount of money withheld from one's paycheck and several other variables. FindLaw's "Federal Taxes" section covers a wide variety of topics pertaining to the filing and payment of federal taxes. Included is a step-by-step guide to filing taxes, information about exemptions, how to determine your tax filing status, popular tax credits, the so-called marriage tax penalty, and more.
The Tax System
The Internal Revenue Code (IRC) is the section of the law that contains all the all of the statutes relating to taxes. Congress, in their authority as the legislative branch of the government, writes and amends these laws. They direct the processes for the collection of taxes, enforcement of rules, and the issuance of tax refunds. The Internal Revenue Service (IRS) is the government agency within the U.S. Department of Treasury responsible for carrying out these functions.
The IRS issues notices regarding its interpretation of the tax code and offers guidance through notices and statements. Although the IRS may offer interpretations disputes that cannot be resolved are ultimately decided by the federal court system exercising its power as the judicial branch of the government to interpret the laws.
Personal Income Tax
Nearly all U.S. residents are required to pay taxes on their personal income every year. Personal income taxes fund programs and services such as schools, roads, national security, and the welfare system. An employer will typically have an obligation to withhold income taxes from their employee's pay. Because the self-employed do not have taxes withheld they may pay estimated taxes throughout the year, or pay their taxes in full when filing in the spring.
Income taxes must be paid on many kinds of earnings including wages, salaries, tips, commissions, business income, rents, dividends, alimony, capital gains, IRA distributions, unemployment benefits, and Social Security benefits. The amount of tax to be paid is determined by the overall amount of income. Those who earn very little may not have to pay taxes at all, while higher earners may be liable to pay for a larger percentage of their income.
Reducing Your Tax Liability
Following the links in this section you can find many strategies for reducing your tax liability. However, there are two fairly standard methods of reducing your tax burden that require little or no preparation or planning; namely tax deductions and credits.
Tax deductions reduce the overall taxable income for an individual. Taxpayers may choose to accept a standard deduction or make itemized deductions. Commonly deductable expenses include student loan interest, college tuition, medical and dental costs, mortgage points, mortgage interest, theft or casualty losses, property taxes, state income taxes, charitable contributions, and home office expenses.
Tax credits are another common method to reduce your tax burden. Commonly available tax credits include earned income credit, first-time homebuyer credit, child and dependent care credit, adoption credit, Hope and Lifetime Learning credit, credit for the elderly and disabled, and retirement savings contributions credits.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
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