A Beginner's Guide to Understanding Taxes and Why They Matter

Understanding your tax responsibilities is crucial for maintaining financial health and ensuring compliance with federal and state regulations. Whether you're filing for the first time or simply want to better understand the process, this guide covers the essentials.

Types of Taxes

Americans encounter several types of taxes throughout the year:

• Federal Income Tax: Based on your taxable income, filed annually with the IRS
• State Income Tax: Most states impose their own income tax in addition to federal
• Payroll Taxes: Social Security (6.2%) and Medicare (1.45%) deducted from wages
• Self-Employment Tax: If you're self-employed, you pay both the employee and employer share of payroll taxes (15.3%)
• Sales Tax: Charged on goods and services at point of sale
• Property Tax: Assessed on real estate and sometimes personal property

Filing Requirements

Most U.S. citizens and residents must file a federal income tax return if their income exceeds certain thresholds. Even if you're below the threshold, filing may be beneficial if you're owed a refund or qualify for credits like the Earned Income Tax Credit.

Common Deductions and Credits

Tax deductions reduce your taxable income, while credits directly reduce your tax bill. Common examples include the standard deduction, mortgage interest, student loan interest, child tax credit, and education credits.

Getting Help

At EverydayCPA, we believe everyone deserves access to quality tax guidance. Whether you need help filing your return, understanding your obligations, or planning for the future, our team is here to help.