7 Things You Need to Know About Taxes

By Miranda Marquit

No one loves tax time. But here we are yet again. If you’re getting ready to file taxes for the first time, there are some things you should know. Even if you’re a veteran of tax filing, it’s a good idea to be reminded of some of the basics. Here are seven things you need to know about taxes:

1. Tax Laws Change on the Regular

One of the most important things you need to know about taxes is that the laws governing them change fairly regularly. Tax breaks are always being instituted on a temporary basis. Sometimes they’re extended, and sometimes they aren’t.

Starting for tax year 2018, the standard deduction was doubled, and a few other changes were made. However, in 2026, those changes are expected to go away — unless Congress does something else before then.

Getting help from tax software or a tax professional can be one way to stay on top of changes to tax law and make sure that you only pay what you have to or get your full refund.

2. You Don’t Have to Pay Taxes on All Your Income

While the IRS definitely wants its cut, you aren’t expected to pay taxes on everything. First of all, federal income tax isn’t levied on gifts of up to $15,000 or inherited money. Life insurance and child support payouts aren’t taxed by the feds, either.

Earned income, however, is another matter. You’ll be taxed on the income you earn, as well as income from passive investments. Make sure you know which types of income are taxed, and which aren’t.

3. Even Without Itemizing, There are Still Deductions You Can Claim

For many millennials, itemizing wasn’t a Thing even before the changes to the standard deduction. However, even if you don’t itemize, there are some tax breaks you might be eligible for, including:

  • Student loan interest paid
  • HSA contributions
  • Educator expenses
  • IRA contributions
  • Armed forces moving expenses

Check Schedule 1 to add up eligible expenses, and then put them on the appropriate line on your Form 1040.

You can also still claim the EIC and some of the other tax credits as well, so check to see if you’re eligible for those tax breaks.

4. Failure to File is Worse Than Not Paying

When you’re worried about paying your tax bill, you might be reluctant to file your return. However, one of the most important things you need to know about taxes is the fact that failure to file comes with a heftier fine and bigger problems than not paying.

You can file for an extension if you don’t have all the info you need to file your tax return, though. So, if you put it off too long, file for an extension to gain some breathing space. However, realize that the IRS still expects you to make a tax payment.

The only time you aren’t penalized is if you don’t owe the IRS money. If you know the government owes you money, you won’t get in trouble for not filing — but you also won’t get your refund.

5. The IRS Offers Payment Plans

If you can’t make your tax payment, the IRS offers payment plans. So, as long as you don’t owe more than $25,000 in back taxes, you can set up a payment plan with the government. It comes with fees, but you can spread your payments out over the course of several years to make things more manageable.

Don’t turn to high-interest debt to pay your taxes. There’s a perfectly acceptable option available that, when compared to most loans, isn’t that expensive.

6. After Three Years You Lose Your Refund

Maybe you know you don’t owe, but you don’t want to be bothered to file your return. That could hurt you down the road. After three years, you forfeit your refund. You can file previous years’ returns, though, so consider filling out the paperwork and getting the money you’re entitled to.

7. Most Audits are Simple to Resolve

While the fear of getting audited is real, the good news is that audits are reasonably rare. And, even if you are audited, there’s a good chance it can be resolved quickly. Most audits only require you to send in the requested documentation. Once that’s done, you should be in the clear — as long as you’ve been honest about your tax situation.

The IRS can only audit you back three years unless there’s evidence of fraud (then it’s seven years). So if you do what you should with your taxes and can back up your claims, you shouldn’t have problems.

Doing your taxes is something most of us are capable of with a little guidance from tax software. Once you understand these things you need to know about taxes, you should be able to move forward with a little more confidence.