This article is in direct response to questions from my students.
Q: Who Pays Taxes?
Everyone who works and lives for more than six months in the
is required to pay some taxes. If you do not work, then you do not pay taxes. What and how many taxes you pay depends on your immigration status. Foreign students on F1 or J visas pay only federal and state taxes and/or local. All others are required to pay also Medicare and Social Security taxes. United States
Q: What do my taxes mean?
Federal Income Tax means you are paying a percentage of your income to the Federal Government. State taxes go to the State you live in and Local Taxes go to the city or town you live in.
and Cities have different taxes. Some states do no have a state income tax and most small towns also do not have taxes. Medicare tax is collected to pay the medical expenses of retired people in the country and Social Security Tax is collected to pay some of the living expenses of retired people. Different States
Q: How do I pay my taxes?
If you work for an employer, and receive a paycheck, your taxes are already deducted from the paycheck. You can see the paycheck for that. Usually the employer pays 6.2% of your Social Security tax directly and then takes from your paycheck the other 6.2%. If you are on commission, then the employer will send you and the Internal Revenue Service (IRS) a form called 1099. You will have to pay all 12.4% of your Social Security Tax and all the other required taxes, based on the amount of money you have received. The employer does not pay anything for you. If you are self-employed, you again pay all your taxes.
Q: What does it mean to file a tax return?
At the end of every January your employer will send you a form called W2 Form. It actually is one form in three copies: one for the federal government, one for the state and one for you. You will see how much you have made the year before and how many taxes you have paid. If you had worked for several employers, you will receive a form like that from each employer. You have to collect all W2 forms and 1099 forms. Then, you have to use the information from these forms and fill in two other forms-one for the federal government and one for the state government. In the past, after you fill these two forms you send them by mail to the appropriate address. Today, it is usually possible to do everything electronically so you do not send by mail anything.
Q: What are these forms and how do I get them?
If you are a typical immigrant you probably can use the simplified version of the two forms known as 1040/1040 A or 1040-EZ for the federal tax and 500 EZ for the state of
. For information on 1040 and other forms you can go directly to the site of IRS. They have option for you to read and download the instructions and the forms http://www.irs.gov/formspubs/index.html Georgia
For the state of
you can go to their web site and download the form 500EZ https://etax.dor.ga.gov/inctax/individual_income_tax_forms.aspx Georgia
These two forms are for people single or married, with or without children, who choose to take the standard deduction. Standard deduction is usually better if you do not have a mortgage or retirement plans. In other words if you worked for somebody and got a paycheck you probably qualify for these two forms.
You can also go to any public library and you will find these forms with the instructions for them in the lobby of the library. You can take as many as you want (two of each will be enough) for free.
Q: Do I file by myself or do I pay someone?
This is your decision to make. If you can read and understand this article, your English is probably good enough to read the instructions on the form and fill in the information. The forms require basic math skills of adding and subtracting numbers. You can also go online and try some online sites where you can file your forms for free. See below links to these sites. If you want to pay, expect to pay between $30 to $200 for a tax preparer when you go to a specific location. Check this article to see average prices for tax preparation. http://taxes.about.com/od/findataxpreparer/a/prices.htm. In any case, DO NOT tell the tax preparer that you want your tax refund now or in a debit card. Tell them you want to receive it in your bank account or as a check in the mail by the government. If you want your money the day you prepare your taxes, the tax agency will take $100-200 for that. Please wait-you will get your money in about a week in your bank account. Look also for volunteer tax preparer services in churches, mosques, apartment buildings, libraries, schools, etc.
Q: Where can I go online to file for free?
The federal government (IRS site) has several links to free online services. You may start there. This is usually for people with less than $58,000 adjusted gross income. Adjusted Gross Income means the income you get after adding all your income from different forms together and subtracting all the deductions or exemptions applicable to you. Some online sites have other age restrictions so read before you go.
For a list of these sites go here:
Most of these sites will do your Federal Tax Return for free but then you will have to pay for the State Return. So, you can do both and then just see the final number they come up for your state return without paying for the actual filing. Then, you can get your paper form and do it yourself. This, of course is only if you want to save some money. Otherwise, be ready to pay $19.95 and be done with both federal and state. It’s your choice.