5 Things You Should Know About Tax Law

Monday, August 16, 2021

Everybody's favorite topic, taxes. We love taxes so much in the United States that 186 million people paid extra and had to get refunds!

All jokes aside, paying taxes is an important civic duty, and everybody needs to know how to do it right in order to protect themselves from audits.

Having some knowledge of tax law always comes in handy. Here are a few examples you may not know about, no matter what tax types you pay!

What To Know About Tax Law: Don't Fail To File

Believe it or not, failing to file your taxes will actually cost you more than failing to pay your taxes. If you are hesitant to file because you know you can't pay, don't go past the deadline.

The penalty for failure to pay is a 0.5% fine on what you owe, and the penalty for failure to file is 5%. That adds up to a lot of money as your tax bill increases, so be sure to file on time. There are other things that happen if you don't file, but that should be enough to convince you!

Refunds Expire

After 3 years without claiming, you forfeit your tax refund. Some people don't file their taxes because they know the government owes them money, and they either don't feel like it or don't have the time. Well, if you wait too long, that refund goes away for good.

Obviously, filing and claiming your refund during the appropriate tax season is ideal, but if you missed a year recently, be sure to claim what's owed to you!

You May Not Have To Pay Estate Taxes

Estate tax rates vary depending on the state. However, if you inherit any amount under $11.2 million per person or $22.4 million per couple, it will not be taxed.

Estate law is tricky, but with the right estate planning attorney, you'll have everything spelled out for you and work for the benefit of your family.

Not All Income Is Taxable

That's important to prepare for and know what isn't taxable. If you receive a financial gift of less than $15,000, life insurance proceeds, and inherited money (under $11.2 million), it will not be subject to federal tax.

Business Owners Can Pay As They Go

If you own a business, you can choose to pay yourself a salary and pay taxes every paycheck as your employees do. This can even give you a refund at the end of the year if you prefer to do it this way.

You will still have to pay self-employment taxes at the end of the quarter or year for any remaining profits that your company saw, but if you live off the salary you take, then it won't come out of your own pocket.

Get Ready To File

Whether you're planning to file your quarterly taxes coming up or do it all next year, knowing a little more about tax law will always come in handy. If you're working on receiving an estate, find out how long it takes to go through probate!

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