Tax Basics

  • What are taxes?

    Taxes are the money you owe to a local, state, or federal government, based on your assets and economic activity, such as personal income, business income, property, and purchases. They fund government operations and public services, including schools, first responders, infrastructure, courts, social services, national defense, government employees, international humanitarian efforts, national parks, and more.

  • What is a tax return?

    Annually in the U.S., you’re required to file an income tax return for income earned in the previous year. This tax return consists of a few summary pages, which are followed by various tax forms and calculations. You’ll file a copy with the IRS for federal tax, and your state and local governments if they collect income tax. Returns include a calculation of taxes owed, based on income, credits, deductions, and tax paid throughout the year. The calculation is dictated by the applicable tax code, and you may benefit from hiring an accountant at tax time if your income or assets complicate your tax liability. You can of course do your tax return by hand, but investing in a quality tax software is generally well worth the money.

  • What is a tax refund?

    An income tax refund is a payment you receive from the government if you paid more in taxes throughout the year than you’re calculated to owe when you file a tax return. Refunds often occur because you overestimated what you’d owe when filling out a W-2 with your employer or because you deliberately over-contributed to ensure a large refund. You’ll receive funds after filing a tax return, either as a direct deposit or a check in the mail.

  • What are tax deductions and tax credits?

    Tax deductions and credits reduce your tax liability, and you have to qualify to apply them. They often respond to financial obligations, such as interest on debt, business expenses, cost of living, or child or elder care costs. A tax deduction reduces the amount of your income considered taxable (as income taxes are levied as a percentage of income), and a tax credit directly reduces your tax owed.

Income Tax

Tax Deductions and Credits


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    TurboTax is the most well-known retail tax software in the United States, but how does it measure up?

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