April 15th might not mean much where you’re from, but it’s a very busy day for United States-ians… it’s TAX DAY! It’s usually the last chance every year to file your individual income tax returns (or file an extension) to the feds at the Internal Revenue Service, aka the IRS. What does that mean? For some, it means lots and lots of fun paperwork. For others, just a few clicks of their mouse.
What are taxes?
Simply put, taxes are money that citizens pay to the state and country to help pay for military, education, healthcare, welfare, civil services, and/or other various public expenditures. This is a big point of contention in some countries, as a large portion of the population want to either pay more or less in taxes to their respective gov’ts. And in an election year, taxes are a very important topic to note from all the different candidates.
We could also learn a valuable lesson from our friend, ultimate manly man, Ron Swanson:
Got it? Simple, right?
History of Tax Day in the USA
Soon after the passing of the 16th Amendment, the U.S. Congress named March 1, 1914 as the first Tax Day. Why March 1? It fell roughly one year after the 16th Amendment was enacted. The Bureau of Internal Revenue created Form 1040 to file and pay personal income tax, which was just 1% (!!!) for income under $3,000 ($4,000 for married joint filers) and up to 6% for the wealthiest Americans. Obviously, this number has changed a lot over the years.
Tax Day was moved to March 15 in 1918 and then again to April 15 in 1955. The official reason for the pushback was to spread the workload of IRS employees, but some economists speculate that a later filing date means the government can wait even longer to pay refunds. The longer the IRS can hold onto the money it withholds via payroll taxes, the more interest it earns.
But even the April 15 due date can shift a little. In 2005, the District of Columbia enacted Emancipation Day on April 16 to commemorate the day Lincoln signed an 1862 law freeing the first slaves in Washington, D.C. When April 16 falls on a Saturday, the holiday is officially celebrated on Friday, and when it falls on Sunday, it’s celebrated on Monday. The IRS can’t force people to file taxes on a holiday (even a local one) or the weekend. That’s why Tax Day became Monday, April 18 in 2011, because Friday the 15th was technically Emancipation Day. In 2012, April 15 is a Sunday and Emancipation Day falls on a Monday, so Tax Day will be Tuesday, April 17 — for everyone.
And you’re in luck, this also happens in 2016! Although today is technically the last day to file, by law, you really have until Monday, April 18, to get your taxes in order. Do the happy dance!
Tax Deductions
“You can deduct that.” “You can write that off.” “Deductible expenses.”
You’ve probably heard these phrases a hundred times. But what do they mean? What are tax deductions and how do they work? And why are tax deductions so important?
The purpose of tax deductions is to decrease your taxable income, thus decreasing the amount of tax you owe to the feds. There are hundreds of ways to use deductions to reduce your taxable income, but many people don’t know about them or know how to take advantage of them.
So when filing a return, some people go through an excruciatingly detailed process of claiming every little thing that could’ve possibly brought them more income, so that it reduces the amount they owe.
But a large percentage of people don’t even know that deductions could also apply to them. Do your research or consult a tax professional to get the best results.
Taxes for Expats
Just because you live overseas does NOT necessarily mean you can skip filing your taxes. For a fun read on the USA’s tax code for American citizens living overseas: https://www.irs.gov/publications/p54/ch01.html
Tax Refunds
One of the best parts of paying taxes, a tax refund [or tax rebate] is a refund on taxes when the tax liability is less than the taxes paid. Taxpayers can often get a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes and estimated taxes that they’ve already paid, plus the refundable tax credits that they claim. In layman’s terms, tax refunds are money given back to the taxpayers at the end of the financial year.
Taxes in Pop Culture
Taxes are also seen as a rite of passage into adulthood… once you’ve filed your first return, you can finally say that you are a real adult! Didn’t Chairman Mao say something about that?
If you have any friends from the USA, feel free to gently share this with them as a reminder to either get their return (or extension) in by Monday!
Or just tell them every April 15th, “Happy Tax Day!”
(Reference: http://money.howstuffworks.com/ and wikipedia.org)