Tax and financial knowledge concerns during Financial Literacy Month

Photo by olia danilevich

Tax Day always is illuminating, but not necessarily in a good way.

Too often taxpayers discover how little they know about not only our U.S. tax system, but how it affects them personally. That unfamiliarity can be quite costly, which is the subject of this weekend’s Saturday Shout Outs.

It's also the headline of the first shout out item, Tax and Financial Illiteracy Are Costing Americans, by Daniel Bunn, who is president and CEO of the Tax Foundation. His post at the Washington, D.C.-based tax policy group’s website points out some alarming findings about our overall lack of tax knowledge.

“Last year, TaxEDU [the Tax Foundation’s educational program] and the Tax Foundation’s Center for Federal Tax Policy conducted the National Tax Literacy Poll examining American taxpayers’ basic knowledge and opinions on income tax filing,” writes Bunn.

The poll’s finding including the distressing discovery that more than 61 percent of U.S. taxpayers did not know, or were not sure of, basic tax concepts related to filing income taxes. And more than half were reportedly unfamiliar with how tax brackets work, noted Bunn.

Unfortunately, the extent of tax illiteracy is nothing new to the tax professionals who help Americans file their taxes (and more) each year.

Or as Joe Kristan, CPA, EideBailly partner, and member of the firm’s National Tax Office, noted when he cited this lack of tax knowledge in a recent pre-Tax Day post, “Whenever someone says ‘I don't want that income, it would put me in a higher bracket,’ it is an example of tax and financial illiteracy.”

That April 14 collection of Tax News & Views Deadlines and Pecans Roundup curated by Joe also gets a shout out because, even though most of us (save a few million taxpayers on extension) are done with filing for the year, it has links to Internal Revenue Service tips and resources that can help improve everyone’s understanding of our tax system.

And since the Tax Foundation piece mentioned some tax bracket confusion, I’m shamelessly plugging my recent post 2025 tax brackets and the tax rate you really pay.

This talk of money and tax knowledge or lack thereof is not just because Tax Day is in April, but also because April is Financial Literacy Month.

That’s why the next shout goes out to the U.S. Government Accountability Office’s (GAO) WatchBlog post on Financial Literacy in a Digital Age. The item looks at GAO’s recent works in this area. It examines, among other things, what consumers should know about digital financial products, and the risks posed by such products.

Finally, today’s final shout out goes to something more positive, an effort to improve our financial (and tax) literacy by teaching youngsters good money habits.

Last week, Treasury Secretary Scott Bessent partnered with the American Banking Association (ABA) Foundation in support of its annual Teach Children to Save Program.

As part of Teach Children to Save Day on April 24, the Treasury Department released a video message from Bessent that will be played during Teach Children to Save presentations to K-8 students across the country.

“Whether it’s saving for a rainy day early or educating yourself on the many tools available for you to start investing and building wealth, it’s extremely important for your future,” the Treasury Secretary said in the video, shown above.

“And that’s why programs like Teach Children to Save are so important,” added Bessent. “They help set you on the path to financial independence."

When all of us of all increase our understanding of our personal financial and tax situations, we not only can improve our lives, but also strengthen the country.

You also might find these items of interest:

• Is the U.S. income tax system on its way out?
• Are you still in the shrinking U.S. middle class?
• Create a tax strategy that utilizes different tax baskets

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