QUESTION
Question about filing taxes and witholding amount from paychecks
Asked on Mar 14th, 2014 on Taxation - California
More details to this question:
Hi, I don't understand a whole lot about how taxes work. I've never filed my taxes in my life or know how to file them. I do know that I have been having taxes automatically taken out of my paychecks for years. According to my employer, my annual income is approximately $40,000. I get paid twice a month. However, when I receive my paychecks, they're for about $1,400 each. This means that after taxes are taken out, I am only making about $2800 a month or $33600 a year. I am 24 years old, single, and live on my own. I do not have any dependents and nobody can claim me as their dependent. Is this correct, or is the government taking more taxes from me than they're supposed to? Also, is it bad that I have never filed taxes? If so, what are the consequences and is it too late to file them? Sorry for the long question, but I'd really like to figure this out
1 ANSWER
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AB Tax Law, Law Office of Adam Brewer
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The taxes that are taken out of your paycheck is known as your withholding. This amount is determined based on your wages and the number withholding exemptions you claim on your form W-4, but isn't necessarily an accurate estimate of taxes owed.
After your employer withholds the taxes from your wages, they are required to deposit this money with the IRS and the State of California's Franchise Tax Board (FTB). At the end of the year, you prepare and file your income tax returns to determine if you owe additional taxes to the IRS or FTB or are owed a refund.
Some taxpayers do not have a filing requirement because they do not make enough money. However, based on the information you provided above, you do have a filing requirement. Failure to file can result in higher tax debts if the tax agency prepares the return for you plus penalties, interest, criminal charges in some cases, and a loss of potential tax refunds if you were otherwise entitled to a refund.
My advice to you is to prepare your past due and current tax returns as soon as possible. If you are owed a tax refund you only have three years to claim your refund by filing an accurate return. For 2010 returns, that deadline is April 15, 2014.
Let me know if you have any additional questions.
Adam Brewer, Esq.
AB Tax Law
1-888-351-3707
Answered on Mar 15th, 2014 at 9:12 PM