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Tax Law & Taxes

Federal income tax in the United States is still somewhat of a recent development, having been put in place in 1862 by the Union during the Civil War. Since then, the US government has developed a complex, progressive system that taxes workers according to their earnings and gives certain credits to students and people raising children. It is a difficult code to understand and if your tax return is not simple, you may need help with it. If you own a company, you may need an experienced tax attorney to make sure you pay as little tax as possible and ensure that you do not break any of the laws.

What are the differences between federal, state and local taxes?

There are many. Local taxes are not collected through income, but instead, through property tax, additions to state sales tax, and various other methods of revenue decided by the local governments. States collect tax through sales tax and for some states income tax, but they cannot over-impose taxes over local regions. The local government cannot take money out of your paycheck; the state and federal government can. State governments often opt to collect “sin taxes” on goods such as alcoholic beverages, tobacco products, gasoline, and in some states, marijuana.

What authority demands me to pay taxes?

The federal government controls the IRS, Social Security, and Medicare, the three ways taxes are deducted from your paycheck every week or two. Your state may also collect income tax depending upon which state you are in. Sales taxes are a mix of federal, state and local measures, and property taxes typically go to the school district of the property’s local area. In 2017, rumors of changes to the tax code are swirling so it is advisable to seek the advice of an accountant or tax attorney to learn the details of the code. For the purpose of filing taxes, you only need to worry about income taxes and property tax if you own property within a taxable area such as a city. Property tax bills come in the mail and no extensive math is required.

What if the amount of property tax I am required to pay does not seem correct?

You can dispute the amount of property tax you are being charged with your local tax authority, usually by challenging their assessment of the value of your property. The tax rate varies by region, but is almost always a percentage of your property value and appealing that amount may save you money if the authority’s value assessment is too high. However, if the difference is small, you must consider whether going through the appeal process is worth your time and effort.

The way that the government or a realtor assesses the value of your property is by finding comparable properties (in location, amenities, and square-footage) who have recently sold and taking an average of the price. It is not an exact science, and mistakes happen.

When you have prices for several properties and want to appeal the amount of tax, simply contact your local assessor’s office with the details and the assessor will initiate a review, a copy of which you will receive in writing. The correspondence need not be done in person, you may do it over the phone. If you do not agree with the review, you may appeal that which involves appearing before an independent board with your documents.

I will not have my income taxes prepared and ready to pay by April 15. Do I have any other options?

You can file a six-month extension which will delay the due date of your filing until October 15 by sending the IRS Form 4868. You may also qualify for an installment plan if you have filed all of the required returns and owe less than $50,000 in tax. There is a user fee for an installment agreement, and they can be requested online or by mail. Depending upon the amount you owe in tax, there may or may not be a minimum payment required.

Can I receive a tax refund if I owe tax from a prior year or have a payment or installment plan?

No. If you owe more than the amount of your refund, the IRS will not issue the refund and will instead apply it to the tax you owe. This is the case if you are on a payment or installment plan, or if your taxes are simply in arrears.

How old can my child be if I want to claim him or her as a dependent?

The child must be younger than 19 years old or a student less than 24 years old at the end of the year for which you are filing the return.

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