## Taxes

### Learning Outcomes

• Apply accounting principles to properly minimize and file taxes

Taxes are what we pay for civilized society.

—Oliver Wendall Holmes, Jr.[1]

## Paying Taxes

During the year, as you work, your employer withholds federal income taxes from your wages and periodically sends them to the Internal Revenue Service (IRS) where they are stored in an account tied to your name and social security number. In addition, your employer will withhold Social Security taxes and some other items, like insurance costs, child support, retirement, and state income tax, if any of those apply.

On or before April 15th of the following year, you will file a form 1040 that calculates your actual taxes, and if your withholdings exceed your actual tax bill, you’ll get a refund. If your withholdings were less than your actual taxes according to your 1040, you’ll have to make a payment when you file the return.

Again, the tax law is complicated and extensive, so it pays to use either an expert system or an actual human expert to calculate and file your state and federal taxes each year.

Don’t get behind on your taxes because they are a legal obligation, but also don’t leave money with the federal government that belongs to you. You are not required to pay anything more than the legal minimum required of you by the Internal Revenue Code. The Supreme Court of the United States established this maxim early on, saying, “The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.”[3]

### Practice Question

1. inscribed on the archway leading to the offices of the Internal Revenue Service in Washington, D.C.
2. Gunasekara, Offain. “Taxes 101: A Primer For College Students.” Bankrate. Bankrate.com, June 1, 2012.
3. Gregory v. Helvering, 293 U.S. 465 (1935).