When Do You Start Paying Taxes?
Being aware of one's tax liabilities is essential. However, some consumers aren't certain of when they need to pay taxes. Those wondering when do you start paying taxes need to do their research. Consumers are sometimes liable for taxes even though they don't realize it.
When tax day rolls around, it's very important that your responsibilities are met. There are a lot of factors to consider when figuring out your tax liability. A lot of people think they don't owe taxes because of their income level or age.
When Should I Start Paying Taxes?
Fortunately, figuring out whether you need to start paying taxes or not is relatively simple. Taxpayers need to understand some basic rules to determine if and when they owe taxes. The following is the key information taxpayers need to understand about when they owe taxes.
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Key Factors In Determining Tax Liability
There are only a few factors involved in determining tax liability. As a taxpayer, you should understand what they are. A lot of people have misconceptions about when they need to start paying taxes. Some key factors impacting whether you owe taxes are income, age, filing status, and whether an individual is a dependent on another taxpayer's return. These factors alone largely determine whether someone has to pay taxes. However, the most important factor to consider is income.
Income
Income is the most important factor that determines if an individual has to pay taxes. Anyone earning enough income has to pay taxes. However, the income amount that makes a taxpayer liable for taxes depends on certain factors. Consumers can benefit from using a tax tracker tool to help them determine if their income amount is high enough to require tax payment.
The most basic income requirement that leads to tax liability is earning at least $12,950 annually.
However, this amount could be more for certain individuals depending on the factors mentioned below.
Tax Brackets
Those who make more than basic income requirements pay taxes at a rate that's determined by their tax bracket. The more a taxpayer makes, the higher their tax bracket. Higher tax brackets mean a higher tax rate.
As of 2023, the tax rate for US taxpayers can range from 10 percent to 37 percent.
Taxpayers of any age need to pay taxes if they reach certain income levels. However, in some cases taxpayers over 65 need to earn slightly more than those under 65 before they have to start paying taxes.
For example, a taxpayer filing single who is under 65 needs a gross income of at least $12,400 before having to pay taxes. However, if this taxpayer is over 65, they must earn $14,050 before being required to pay taxes.
Tax liabilities vary depending on what a taxpayer's filing status is. Possible filing statuses include single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with a dependent child. Those who are married filing jointly have their minimum income amount calculated based on two people. Therefore, income requirements required for tax liability are higher on returns with a filing status of married filing jointly.
Those who are claimed as a dependent on another taxpayer's return generally don't have to earn as much to be required to pay taxes. This is especially true when it comes to the unearned income of a dependent.
Tax liability can vary slightly depending on the types of income an individual earns. This is especially true when it comes to dependents. A dependent's tax liability can vary depending on whether the dependent has unearned income or earned income. Unearned income means income from interest or dividends on investments. Earned income refers to income from wages, salaries, etc.
A dependent under 65 needs to pay taxes on unearned income in excess of $1,050. A dependent under 65 needs to pay taxes on earned income in excess of $12,000. These income requirements for unearned and earned income are slightly higher for taxpayers who are blind or over 65.
Consequences of Not Paying Taxes You Owe
Knowing when do you start paying taxes is one of the most important things to know about taxes. That's because there are numerous serious consequences of not paying taxes. All of these consequences take a toll on a consumer's finances. Understanding these consequences is a good idea. Those who know the consequences of not paying their taxes are more motivated to pay them.
A tax debt can grow considerably over time even if a taxpayer stops making money. Eventually, the IRS will always pursue a growing tax debt. They can do this in numerous ways. The following are four of the most severe consequences of not paying taxes.
Garnishment of wages
The IRS has the power to garnish the wages of a taxpayer who owes money. When the IRS garnishes money, the IRS takes owed taxes directly out of a taxpayer's paycheck. The taxpayer has no control at this point. The IRS determines an amount to garnish paychecks by and begins taking back the tax debt in question.
Needless to say, garnished wages create huge problems for taxpayers. If a taxpayer is expecting a higher paycheck, he or she will struggle to make ends meet after wages are garnished. That's why it's really important to take care of a tax issue before wage garnishment begins. The only way to stop wages from being garnished after this has started is to come to an agreement with the IRS.
Interest charges
A tax debt can grow over time because the IRS charges consumers interest. This means that they'll add a percentage of the tax debt on to the total tax debt after a given period of time has passed. The longer a taxpayer owes money, the higher the interest charges will be. Interest charges can add up significantly over time. Interest charges can make a tax burden unmanageable for a consumer. It's easy to become overwhelmed with money owed to the IRS when interest charges add up. The only way to stop interest charges from adding up is to pay the debt.
Tax liens and credit damage
The IRS can file a tax lien against a consumer if he or she owes taxes. A federal tax lien will let creditors know that a consumer owes taxes. This creates problems when the taxpayer attempts to borrow money. A federal tax lien can cause severe damage to a consumer's credit score. These liens can bring down a taxpayer's score for a long time. It's usually possible to prevent a federal tax lien by signing up for a payment plan with the IRS.
Penalties
The IRS doesn't just charge interest to taxpayers who don't pay their tax debts. The IRS can also charge penalties to a taxpayer's account for a variety of reasons. The IRS can charge penalties because the taxpayer has failed to file a return when necessary. The IRS can charge penalties because the taxpayer failed to a file a return by the due date. The IRS can also charge penalties because a taxpayer has not paid off a debt by the due date. Like interest charges, penalties add up over time.
Making Sure Your Taxes Are Paid Properly
Clearly it's very important for a taxpayer to know if he or she is liable for tax payments. Taxpayers will be happy to know that there are tax tools that can help them understand their tax liability. Taxry is a great tool to use to better understand your tax liability.
Taxry hooks consumers up with a variety of different tax offers. These offers can include tax management software that helps consumers to organize their tax returns and tax payment records. Taxry also is a great place for finding tax preparation firms. Consumers can have more peace of mind regarding their taxes if they have them done professionally. However, it's important to do a good amount of research before choosing a tax preparation firm. Taxry provides consumers with the information they need to make the right decisions about tax management and preparation.
Finally,
With this information, you should be able to determine if you owe taxes or not. Understanding the above gives you the peace of mind of knowing you are meeting your tax liabilities. The consequences of not paying taxes you owe can be severe. That's why it's important to take care of taxes promptly. Delaying paying your taxes can push up your tax costs. You don't want to deal with the stress of having tax debt.
You should know when do you start paying taxes. You should also make paying taxes a priority. There is no getting away from tax debts you owe. You will eventually have to pay money you owe to the IRS and state departments of taxation. The sooner you pay these debts, the better off you will be.
Owing taxes damages your finances. If tax debt builds up year after year, it could become overwhelming. Get on the path toward better finances today by understanding all your tax responsibilities. This will ensure that you can meet and exceed your financial goals.