Q: What are taxes?
A: Taxes are mandatory payments made by individuals and businesses that help fund important elements of society. Taxes support things like schools, roads, parks, hospitals, military, Social Security, welfare assistance, police departments, and fire departments. (A.R.S. §43-202)
Q: How does the government collect taxes?
A: Two examples are income tax and sales tax:
- Income tax is when the government takes a portion of the money you earn from your job. (A.R.S. §43-1011) Most people have taxes automatically deducted from their paychecks - a process known as 'withholding.' (A.R.S. §43-401) People must file their income taxes each year. If you do not withhold enough from your paychecks, you will owe more money after filing. If you withhold too much, the government will owe you a tax refund.
- Sales tax is when the government adds extra money to what you pay when you buy things like goods or services. (A.R.S. §42-5010)
Q: Who is required to pay taxes?
A: Anyone over the age of 18 must pay taxes if their income exceeds the tax filing threshold set by the government each year. For example, in 2022, the threshold was $12,950 – so anyone who made more than that in 2022 is required to pay taxes for that year. Visit the IRS and Arizona Department of Revenue websites for the most recent tax filing thresholds.
Q: When are taxes due?
A: Income taxes are due on April 15th every year. However, if April 15th falls on a weekend or holiday, the deadline may be extended by a few days. (A.R.S. §43-931)
Q: Who collects taxes?
A: The federal government and state governments both collect taxes. The IRS (Internal Revenue Service) is the federal agency responsible for collecting federal taxes and the Arizona Department of Revenue is the agency responsible for collecting taxes in Arizona. (A.R.S. §42-1004)
Q: How do I file my taxes?
A: One of the most common ways to file taxes is through online tax filing. Gather your financial documents, including your W2 (Employers are required to provide your W2 from the previous year by January 31st) and use an online tax filing service to complete the necessary forms and submit them electronically. You can also choose to pay a tax preparer to file your taxes for you. (A.R.S. §43-323)
*Remember - you must file taxes for both your federal taxes and state taxes!
Q: What happens if I don't pay my taxes?
A: It's crucial to pay your taxes on time. Failing to do so can lead to consequences including but not limited to:
- Penalties and Interest: Federal and state governments may impose penalties and interest on the unpaid taxes, which can significantly increase the amount owed over time. (A.R.S. 42-1125)
- Legal Action: The IRS has the authority to impose fines, wage garnishment, or even criminal prosecution in cases of tax evasion.
- Damage to Credit Score: Unpaid taxes can negatively impact an individual's credit score, making it more challenging to secure loans or credit in the future.
Laws may have changed since the last time this article was updated. The current and most up-to-date laws can be accessed here and here.