TAX BASICS

You are responsible for knowing whether you need to pay income taxes and for getting the paperwork and taxes in on time. Taxes are paid for each calendar year (January through December) and are due by April 15. Taxes for 2004 will be due April 15, 2005.

If you have a steady job, your employer takes money for your taxes out of each paycheck. At the end of each year, your employer sends you and the IRS a W-2 form that shows the total tax you paid that year. The IRS mails you a form that you need to fill out and return (a 1040 or 1040 EZ). You use the form to tell the IRS how much you have already paid in taxes and how much more you owe or how much you should get back.

Note: Some jobs are “on contract” and taxes are not taken out of the paycheck.  If you have a job like that, you need to save money to pay what you will owe in taxes. You may need to pay “estimated taxes” throughout the year instead of waiting until end of the year.

If you paid more than you need to in taxes during the year, you get a “refund.”  If you did not pay enough, you will have to send a payment with your paperwork for the rest of the taxes you owe. If you cannot afford to pay, you can also set up a payment plan where you will pay over several months or years. It is important to keep good records about your taxes for at least three years.

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