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General tax information
Understanding tax fundamentals can save you money.
Doing your tax return isn't always as daunting as it seems. In fact, it actually can be a great opportunity to get your financial house in order.
If that opportunity lacks appeal or your finances are just too complicated to handle on your own, there are plenty of tax professionals who can do the work for you.
No matter which route you choose, however, you should understand tax basics for two reasons: You are legally responsible for your tax return; and being tax-savvy throughout the year can save you a great deal of money over time.
In this lesson we'll go over some tax essentials, including:
- How much you should withhold;
- What those oft-heard but rarely defined phrases on your 1040 mean;
- What tax records you should keep;
- How you can avoid an audit; and
- Some good tax-planning strategies.
Unless we note otherwise, we're talking primarily about federal taxes. State and local governments impose a variety of income, sales, and property taxes that are too complex and varied to address here.
Not every dollar of your income is taxed at the same rate.