Any person, company, business, or self-employed person who has generated income or profit during a tax year must report their federal income taxes to the IRS.
Taxes are also reported on trusts, estates, inheritances, interest, investments, lottery winnings, unemployment benefits, and other forms of income.
The following qualify as taxpayers:
US citizens (by birth or naturalized)
Resident foreigners and non-resident foreigners.
For tax matters, the IRS does not consider a person’s immigration status to limit their obligation to pay taxes. The general rule says that if you generate or have profits, you must report taxes.
To file taxes, you must use a taxpayer identification number. The options are:
Social Security Number (SSN)
Individual Taxpayer Identification Number (ITIN), if you do not qualify to have an SSN.
Differences between state and federal taxes
It should be clear that the federal income tax is different from the state income tax. But most U.S. residents must pay both taxes.
The federal income tax goes to everyone who has earned a minimum amount of money to meet this tax obligation. State income tax can be calculated at the same time as federal income tax, but it is paid separately, and the rules vary by state.
Federal tax is reported to the IRS, and state tax is filed and paid to your state’s tax office.
There are special cases when the same taxpayer has a tax burden in two states, either because he works and lives in different states, generates profits in two states, or has jobs in different states, among other reasons.
States are not required to collect income taxes.
The following states do not require profit taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. But its residents must file federal taxes.
Federal income tax has different rates to calculate it, and it depends on the amount of money you have earned in a year. States decide how to do this on their own; some have variable rates, and others have single percentages that don’t change.
States with single tax rates are: Colorado, Illinois, Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah. For example, in these states, if one person earns an income of $30,000 and another earns $1 million, both will pay taxes calculated at the same percentage.
How do I do taxes in the United States?
If you are an employee and receive salary payments from a company, you need the W-2 form to know the amount you must report in taxes. You can then file your income taxes with Form 1040.
If you are an independent contractor and have received more than $600 in a year, you must use the 1099-MISC forms prepared by your clients to know the total to report in taxes. You can then document it with Form 1040.
If you do not have W2 or 1099 tax forms, you can still file your taxes with Form 1040 and complete Schedule C
- Schedule C.
- If you receive cash income, you can file your taxes as well.
How are taxes paid in the United States?
Once you have filed your taxes, you will know if you will receive a refund or if you will have to pay the IRS, or your state, the difference you owe.
If you need to pay, you can do so online when you submit your tax return with a debit or credit card. You can also send a check by regular mail, pay by phone, or pay with your cell phone. Be sure to use official IRS resources and avoid being subject to fraud.
If you do your taxes with the help of an accountant, they will help you process your payment. Taxes can also be paid in cash at stores authorized by the IRS.
Should I file my taxes on time?
In the US, the last day to file tax returns and pay what you owe is April 15. But you can submit your return sooner. However, there are times when the IRS extends the tax filing date due to emergencies or other administrative matters.
If, for some personal reason, you are unable to file your tax return on time or pay what you owe, the IRS grants you an extension. For example, if you submit Form 4868, you could get a deadline in the next six months, meaning you have until October 15 to file taxes. You could then ask for another extension, but they will ask for a good reason before granting it to you.