Tax Explainer | Forms, Filing, & Facts

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You’ve heard all the jokes and tropes about taxes. They say nothing is certain in life except death and taxes; that people have giant boxes of receipts in their closets just waiting for the tax preparer; that there’s a mad scramble in April to get those returns filed.

But understanding the ins and outs of the tax system is no joke. Britannica Money is here to help.

Explore this Learning Journey and review the types of taxes we pay, understand how to file your taxes and what forms are used, and learn about tax deductions and credits. As a bonus, find out if it’s smart to file an extension, what to do in case of an IRS audit, and get ideas for spending a tax refund.

The taxes you pay influence how you spend, earn, and invest money.

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1. Basic tax concepts and filing requirements

Let’s start with the basics. You know you pay taxes, and that some of it comes right out of your paycheck. Our federal tax system is based on a progressive tax system, meaning people who make more money are charged more tax. What does it cost to have someone help you with your tax return? Do you even have to file? Learn about tax brackets, filing requirements, and more.

Give till it hurts: A list of the taxes we pay

Taxes come in many forms—income, payroll, property, sales, and excise—each collected to fund government programs and public services.

What’s a marginal tax rate? How do federal tax brackets work?

Federal income tax brackets use a progressive system where higher portions of income are taxed at higher rates, ranging from 10% to 37%.

Filing a tax return: When it’s required and when it’s worth it

Single filers under 65 earning less than $14,600 ($16,550 if 65+) in 2024 don’t need to file taxes. Limits for other statuses range from $21,900 to $32,300.

How Much Does It Cost to File a Tax Return?

Filing your taxes: Answers to 6 frequently asked questions

Filing your taxes can be complicated, but resources exist to help get your return filed on time with less fuss. And depending on your age or income, it may cost you nothing.

2. Tax forms and income items

You’ve figured out that you need to file a tax return. But what’s up with all these forms? Learn about the various tax schedules, including various types of Form 1099 (which is used to report income to you). When investments bring in income or capital gains, you need to report that on your return. And if your child earns investment income, you will need to be aware of the kiddie tax.

Tax Schedules and Forms for Filing Income Taxes

Tax schedules and forms related to Form 1040, U.S. Individual Tax Income Tax Return

Form 1040 tax schedules and forms are supplemental IRS documents. They organize income, deductions, and credits, with over 15 schedules and 100 related forms.

Form 1099: What it’s for and how it affects your taxes

1099 forms are used to report earnings from numerous sources on your tax return and help you avoid penalties for underreporting your income.

Capital gains and losses: Keeping track and paying taxes

Capital gains tax applies when you sell a capital asset for more than its cost basis. Long-term gains are generally taxed at lower rates than ordinary income.

The kiddie tax: How the IRS taxes your child’s investment income

The “kiddie tax” applies to a child’s unearned income over $2,700. Parents may need to file Form 8615 or report it on their own return using Form 8814.

3. Tax deductions and credits

You’ve learned what will be included in your taxable income. But what can be deducted from your income to reduce your tax? Learn about the standard deduction versus itemizing deductions, including the state and local tax deduction. Find out how tax credits directly reduce the amount of tax you owe, and if you might be eligible for any of them.