Tax season is the period when taxpayers file their tax returns with the government. In the United States, tax season typically runs from January 1 to April 15 for personal taxes and from January 1 to March 15 for corporation (LLC) taxes each year. During this time, individuals and businesses gather their tax documents, fill out their tax forms, and submit them to the Internal Revenue Service (IRS).

Here are some key things to know about tax season:

Filing deadline: The deadline to file your tax return is usually April 15 each year. However, extensions may be available depending on your circumstances.
Tax Preparation: At MB Insurance & More Services we make sure that your tax preparation is frustration-free, simple and easy.
Tax payments: You may owe taxes when you file your return or be entitled to a refund.
Tax documents: You'll need to gather several documents to file your tax return, such as W-2s, 1099s, and receipts for deductible expenses.

It's important to file your taxes accurately and on time to avoid IRS penalties and interest charges.

Why do I have to file taxes in the US?

For most citizens and residents understanding the reasons behind this requirement is crucial. Here are the main reasons why a person should file taxes in the U.S.:

Legal Obligation

The Internal Revenue Service (IRS) is the government agency in charge of collecting taxes in the United States. Federal law requires most U.S. citizens, permanent residents, and in some cases, nonresident aliens to file an annual tax return if they meet certain income thresholds.

Utility Financing

Taxes collected by the federal government are the primary source of funding for a wide range of essential public services. These include:

Infrastructure: Roads, bridges, public transport systems.
National Defense: Maintenance of the armed forces and national security.
Health and Welfare: Programs such as Medicare, Medicaid, and Social Security, which provide support to retirees, people with disabilities, and low-income people.
Education: Funding for public schools, colleges, and student aid programs.
Research and Development: Support for scientific and technological research.
Government Services: Maintenance of the various federal departments and agencies.

Principle of Ability to Pay

The U.S. tax system is based on the principle of ability to pay, which means that those with higher incomes tend to pay a higher proportion of their income in taxes. This system seeks to be progressive, with different tax brackets that increase as income increases.

Obtaining Refunds and Tax Credits

Even if a person doesn't owe taxes, they may need to file a return to receive a refund. Many people have tax withholdings from their paychecks throughout the year, and if the amount withheld is more than the amount of tax they owe, they are entitled to a refund. In addition, there are numerous tax credits (such as the Child Tax Credit or the Earned Income Credit) that can reduce the tax liability or even result in a refund, even if you didn't have a withholding.

Avoid Penalties and Legal Problems

Failing to file a tax return when you are required to do so, or failing to pay taxes owed, can lead to serious consequences. The IRS can impose penalties, interest, and, in cases of intentional tax evasion, even criminal charges.

Compliance with International Agreements

For U.S. citizens and permanent residents living abroad, the obligation to file taxes in the U.S. remains, regardless of where they reside or generate income. This is due to the tax-based citizenship system that the United States has. However, there are provisions such as the Foreign Tax Credit or the Foreign Earned Income Exclusion that help avoid double taxation.

Future Benefits

The tax return contributes to the recording of income, which can be important for various purposes in the future, such as:

Loan Application: Lenders often require tax returns to verify income and ability to pay.
Eligibility for Social Benefits: Income history and tax payments may be relevant to qualifying for certain programs.
Credit History: Indirectly, tax compliance can influence the perception of financial responsibility.

In short, filing taxes in the U.S. is not just a legal obligation, but a fundamental mechanism for the functioning of government, the provision of essential services, and the maintenance of an equitable tax system.

What is the standard deduction?

The standard deduction is a specific dollar amount that reduces the amount of income you have to pay taxes on. Your standard deduction is the sum of the basic standard deduction and any additional standard deductions for age and/or blindness. Generally, the standard deduction is adjusted each year due to inflation and varies depending on your filing status, whether you are age 65 or older and/or blind, and whether another taxpayer can claim you as a dependent. The standard deduction is not available to certain taxpayers. You can't claim the standard deduction if you itemize your deductions.

Who is not eligible for the standard deduction?

Certain taxpayers are not entitled to claim the standard deduction:

You are a married person filing separately, whose spouse itemizes deductions.
You are a person who was a nonresident alien or alien with dual residency status during the year (see certain exceptions below)
You are a person filing a return for a period of less than 12 months due to a change in your annual accounting period
You are filing as an estate or trust, common trust fund or partnership

However, certain individuals who were nonresident aliens or dual resident aliens during the year may claim the standard deduction if:

You are a nonresident alien married to a U.S. citizen or resident alien at the end of the tax year, who makes the joint election with your spouse to be classified as a resident of the United States for the entire tax year;
You are a nonresident alien at the beginning of the tax year, who becomes a U.S. citizen or resident by the end of the tax year, married to a U.S. citizen or resident alien at the end of the same tax year, and you jointly elect with your spouse to be classified as a resident of the United States for the entire tax year, and
Students and business interns who are residents of India and who are eligible to receive benefits under Article 21.2 (Payments Received by Students and Interns) of the U.S.-India Income Tax Treaty.

Additional Standard Deduction

You are allowed an additional deduction if you are 65 years of age or older at the end of the tax year. You are considered to be age 65 the day before your turn (for tax year 2024, you are considered 65 if you were born before January 2, 1960). You are allowed an additional deduction for blindness if you are blind on the last day of the tax year. For example, a single taxpayer who is 65 years old and blind would be entitled to a basic standard deduction and an additional standard deduction, equal to the sum of the additional age and blindness amounts. For tax year 2024, your additional standard deduction based on your age or blindness is $1,550 or increases to $1,950 if you are also single and not a surviving spouse.

At MB Insurance & More Services, we work tirelessly to maximize your taxes and provide you with the necessary support free of frustration.