Teens & Taxes: Spring Is Coming! But So Is Tax Day
February 2, 2016 : H&R Block Dollars & Sense
Punxsutawney Phil’s declaration this morning that we’re in for an early spring may have you thinking of frolicking through dewy meadows, but don’t let that distract you from the upcoming tax deadline.
For 2016, that date remains fixed as April 18, despite what any rodent has to say about it.
With that sobering reminder, it’s a good idea for teens to learn the tax basics while still cooped up indoors. In the event your teen needs to file a return, getting the work done now during the winter months so one can relax in spring is a good idea.
Here are five important facts to help you understand taxes:
1. What exactly are taxes?
Taxes are imposed on citizens by federal and state government bodies to finance various public services, such as transportation and infrastructure (think highway maintenance) and Social Security (monthly benefits to support the retired or eligibly disabled and their families) among other safety net programs. In essence, taxes help to support the country we live in.
2. What’s the deal with Tax Day?
The chatter around Tax Day deals specifically with income tax, which is money deducted from paychecks and other forms of earned income, like investments. Typically on or before April 15, Americans must file a tax return, which notifies the government how much money individuals have earned over the past year and how much they’ve already paid the government through taxes. If you’ve paid more than required, you will receive a refund from the government. If you haven’t paid enough, then you’ll have to fork over extra cash.
3. How did this all come to be?
A federal income tax was first imposed in the 1860s when the government needed money to fund the Civil War. Congress repealed this in 1872, but subsequent iterations of a federal income tax were imposed in large part to fund our military for protection from enemy nations. In 1913, the Sixteenth Amendment of the United States Constitution was ratified, decreeing Congress’s right to impose a Federal income tax.
4. Is paying taxes voluntary?
Simple answer: NO! Although the U.S. income tax system is defined as a voluntary system, reporting income your income to the IRS is mandatory. If you’re an income-earning resident of the United States or a nonresident with taxable U.S. earnings, you are required to pay your tax liability. No one is immune, not even the powerful and dangerous. Sure, Al Capone could get away with organized crime activity, but he couldn’t escape tax evasion. If you don’t pay the government, they will find out and collect their money, often with penalties and interest. In the most severe cases, criminal action can be taken against delinquents.
5. But do I have to file a tax return?
Good question. That depends primarily on your age and income, along with some other factors. If you worked a job and had money taken from your check, you should file one because you may get money back. Read this earlier Dollar & Sense blog post for a more detailed explanation of whether or not teens have to file a tax return.
Understanding how to file a tax return can be complicated, which is why it’s beneficial to gain an understanding of the basics early on. It may not be everyone’s favorite, but it could be worse. You could be a groundhog tasked with crushing the warm-weather dreams of an entire country.