Tax Faq: Answers To Basic Questions About Taxes

* What is a W-2 form?

The W-2 is a form that an employee receives from his or her employer once a year. It is also sent to the IRS at the end of every year. The total annual wages paid and the taxes that the employer withheld from each paycheck are shown on the W-2 form. Federal law states that the W-2 form must be mailed by January 31st of each year.

It consists of six copies:

Copy A Submitted to the Social Security Administration from the employer.

Copy B Sent to the employee to be attached to the federal income tax return when it is filed.

Copy C Sent to the employee to be kept for their records.

Copy D Retained by the employer for their records.

Copy 1 Sent to the employee to be filed with the state or local tax if required.

Copy 2 Also sent to the employee to be filed with the state or local tax return if required.

* What is a W-4 form?

The W-4 form is usually filled out by an employee whenever he or she starts a new job. It tells the employer the right amount of tax to be withheld from each paycheck and paid to the government.

You should review your federal and state withholding information (shown on the W-4 form) at least annually to ensure that it reflects your current tax situation. If you get married, separated, divorced, or have a child, then you need to update your W-4 form.

* What records do I need to fill out my tax forms?

Below are some forms you might need to fill out:

– If you are self-employed earning more than $400, or if you are a church employee, you must fill out Schedule SE.

– If you are an employer you must pay an employment tax.

– If you have manufacturing business, you will be paying excise taxes.

* Whom can I claim as a dependent?

You can claim a dependent if the person is a qualifying child or a qualifying relative. When claiming children, he or she must be your child, stepchild, adopted child, foster child, brother, sister, grandchild, niece or nephew. The dependent should be living with you for more than 6 months of the year and should also be under the age of 19 at the end of the year, or under age 24 and a full-time student for at least five months of the year, or any age and totally, permanently disabled.

* What if I do not file my taxes on time?

If you forget to file on or before the due date (usually April 15 of every year) you should file as soon as you can. Not filing on time costs you penalties and interest. Usually a 5% interest on taxes not paid will be added onto your tax until it accumulates to 25%. Also, there is usually a separate charge if you do not file on time. If you fail to file a tax return at all (when you owe taxes) you can go to jail.

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