The tax code is complicated. Even for the most basic situations, there are income levels that determine whether you must file, and if so, what your tax rate is. As your life and finances get more complicated, so do your taxes.
That’s why most of us depend on tax software to meet our annual filing needs. Even the tax professionals we turn to for added support go electronic, mostly at the Internal Revenue Service’s insistence.
But it never hurts to have a least a rudimentary understanding of our tax system. It is our money that’s being taxes, and we should know at least a bit about the why and how that’s done.
The more knowledgeable we are, the more we can understand the tax laws Congress makes, or doesn’t, and how and why they’re collected, or not, and spent. That information also can help in the demands we should make of our lawmakers when it comes to our taxes.
Unfortunately, a recent survey found that most U.S. taxpayers do not know or are unsure of basic tax concepts.
The National Tax Literacy Poll by TaxEDU, the Tax Foundation’s educational program, and the Washington, D.C.-based tax policy nonprofit’s analyses of the findings — the Need for Better Tax Education on April 8 and Understanding the Tax Code on May 29 — earn this weekend’s Saturday Shout Outs.
Here are some of the highlights (lowlights?) pointed in both pieces by Zoe Callaway, Director of Education at the Tax Foundation, where she oversees the TaxEDU program.
On average, more than 61 percent of the National Tax Literacy Poll did not know or were not sure of basic tax concepts related to income tax filing.
More than two-thirds of respondents did not know the top federal income tax rate.
More than half did not know how tax brackets work.
The majority of respondents also answered incorrectly when surveyed about the value of tax credits vs. tax deductions.
The bottom line is that this lack of basic tax filing familiarity leaves most Americans confused by and dissatisfied with the federal tax code.
“Education is the first step in achieving more accurate and productive conversations about taxes, more informed financial decision-making, and even better tax policies,” she notes.
These two items are just the first in a series the Tax Foundation’s series of posts about the National Tax Literacy Poll. A full analysis will be released at the end of the series. I’ll update this post as they are posted.
Now, I’ll let you get to your at-home weekend tax studies.
You also might find these items of interest:
- Why tax credits rule
- Do you have to file a tax return? Probably
- Monthly Tax Tips pages: January, February, March, April, and May so far (the rest are on their way)
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