5 Steps To Understanding Tax Laws From Dennis Bonnen

by Josh Biggs in Finance on 8th December 2022

If you’re like most people, tax laws probably seem confusing and intimidating. But don’t worry – we’re here to help! This post from Dennis Bonnen will break down the basics of tax law so you can better understand how it affects you and your business. We’ll also provide some tips on staying compliant with the law. So whether you’re a small business owner or an individual taxpayer, read on for everything you need to know about understanding tax laws.

Know The Basics Of Taxation

Taxation can be a tricky business, and there is a lot to learn when it comes to tax laws. The first step to tackling taxes is understanding the basic principles of taxation. Taxation is imposed by governments on the income of individuals or businesses and is used to finance public expenditures. To fully understand taxation, it’s essential to know not only who pays taxes but also why taxes are necessary in the first place. Tax revenues are generated for government entities that provide public services like highways, police departments, and schools. Understanding taxation doesn’t just stop with knowing what and who gets taxed, it’s also about understanding where your tax money goes—which could be toward programs like Social Security, Medicare, Medicaid, or defense spending!

Knowing the past allows taxpayers to have a better understanding of present-day systems. And that knowledge should motivate us all to do our part in paying our fair share so we can support essential services our communities need. With a clearer understanding of tax laws, we can make more informed decisions when it comes time to file taxes yearly.  Learning taxation basics is the first step toward mastering today’s complicated filing regulations.  With a firm grasp of these concepts and an awareness of which resources are available, knowing the basics of taxation will help shed light on the many complexities surrounding America’s tax codes today.

Find Out Which Taxes Apply To You And Your Business

Knowing which types of taxes apply to your business can be crucial to keeping your finances in order. Depending on the nature of your work, your tax burden may vary dramatically from someone else in the same industry. It is crucial to understand which taxes apply to you and your business so that you can make sure all of your financial records are accurate and up-to-date.

For example, if you own a retail store, you may need to pay sales tax; Dennis Bonnen says if you provide services to customers, you may have to pay VAT or other professional services taxes; and if you use an online payment processor such as PayPal or Stripe, you may be required to submit its unique taxes.

Once you understand which taxes apply to your company, you must stay updated with deadlines and legal requirements. This way, when it comes time to file tax returns, everything will already be prepared and ready for submission. Therefore, ensuring you know where and how you should pay taxes is critical for any successful business operation.

Understand How Tax Brackets Work

Most taxpayers are familiar with the tax brackets—but have you ever taken the time to understand how they work? Tax brackets provide guidelines for calculating how much income is taxed at a specific rate. In most cases, as your income increases, so does the amount that is taxed. However, it’s important to note that even when your income rises within one tax bracket, only the additional income is taxed at a higher rate—not your total income.

For example, if you make $35,000 a year and enter a new tax bracket where 22% is the new rate on all additional income, only your increase in earnings will be subject to this higher percentage of taxation, not all $35,000. Naturally, interpreting tax stacks can be complicated—especially since rates are tiered and vary by state—so it’s wise to consult an experienced accountant or financial advisor who can help you maximize your deductions while keeping more of what you earn. By understanding how tax brackets work inside and out, you can ensure your money works just as hard for you as you do for it.

Learn About Common Deductions And Credits

Taxes can be confusing and intimidating, but with little knowledge and guidance, filing taxes efficiently doesn’t need to be daunting. One of the most important things to remember when filing taxes is that there are many deductions and credits that taxpayers can take advantage of. While some deductions are standard for everyone, such as the deduction for charitable contributions, other deductions vary from individual to individual.

Dennis Bonnen says there are additional deductions for those who own homes or have dependent children. These include mortgage interest deductions and the Child Tax Credit. Deductions reduce your taxable income (and thus your tax liability!). At the same time, credits are subtracted from the total amount of tax owed directly — sometimes meaning you won’t owe any taxes at all! Learning about specific deductions that apply to you can save a lot of money when filing your taxes each year.

Know When And How To File Your Taxes

Knowing when and how to file taxes is an integral part of life for taxpayers. For individuals, the deadline for filing taxes can vary year-to-year, but it’s typically due in mid-April unless you opt for an extension with the IRS. Filing your taxes on or before the deadline can help you avoid penalties and interest fees. You also need to know what documents and critical information you need to provide when filing your taxes, like Social Security numbers and copies of income statements.

Considering the complexity of your financial situation, consider seeking professional advice when filing your taxes. There are various services available if you choose this option—from online tax preparation software to a Certified Public Accountant—so be sure to research which is right for your needs. Ultimately, preparing and filing your taxes can seem daunting but understanding when and how it needs to be done is crucial to comply with the law entirely. Research and planning allow anyone to file their taxes accurately and on time.

Final Thoughts

Tax laws are complex. Once you understand taxation, it’ll be easier to figure out which taxes apply to you and your business. You can also start understanding tax brackets, standard deductions and credits, and when to file your taxes. If you need clarification on the rules or regulations surrounding taxes, feel free to contact a professional for help.

Categories: Finance