In the United States, April signifies the time to file taxes—and most would agree that it’s no fun. However, even if it’s a chore, knowing how to correctly submit your tax forms and what tools are available to assist you is important. Read on to learn more about why tax literacy matters, what resources can simplify the filing process, and how emerging technology can be leveraged to make Tax Day even easier.
Simply put, tax literacy is the knowledge you need to understand and successfully participate in your country’s tax system. In the United States, it might look like knowing how much of your income is taxable, being aware of deductions and tax credits, and knowing how and when your taxes are due.
If you’re making money, you probably owe taxes on it, making knowledge of how to file a crucial skill. Tax literacy helps you understand what deductions you can claim so that you don’t pay more than necessary or miss out on a potential refund. A solid grasp of the tax system also includes awareness of potential credits you can claim if you have children, pay for higher education, or donate to charity—just to name a few examples. Besides ensuring you maximize the benefits from your taxes, tax literacy also shields you from penalties or even audits, which can occur if you make a mistake or fail to file a necessary form.
Curiosity is key when it comes to learning more about taxes. Since tax laws are adjusted yearly, it’s helpful to keep up with changes as they happen and familiarize yourself with the tax system before it’s time to file. This can mean reading up on news from the IRS itself, talking to a tax professional, or utilizing the informational sections of tax filing software. Both free and paid tax websites include step-by-step explainers on how they filled out the forms, and they can be a valuable resource for better understanding why you paid specific taxes or how you can qualify for tax credits.
You can also build comfort with filing your taxes by making sure the filing process is hands-on. If you have somebody else prepare your taxes or if you use a website that fills out the forms for you, make sure you’re still looking over everything and understanding what the numbers mean. It’s always smart to verify that the information is all correct but taking a second look also allows you to build familiarity with the forms and systems so that you’re ready to do it again next year.