Everyone that has a job and makes enough money pays taxes. Why is it important to...
Everyone that has a job and makes enough money pays taxes. Why is it important to know the tax laws and how they will apply to you? How can taxes affect your ability to save money for the future? Why do many people avoid the topics of taxes more than other areas of personal financial planning?
Homework Answers
1] Why is it important to know the tax laws and how they will apply to you?
Tax laws prescribe the payment of taxes and filing of returns when the taxable income is beyond a specified amount for the category of tax-payer to which one belongs. Failure to do so invites penalties and other consequences. Hence, it is important to know the tax laws and its applicability to us.
2] How can taxes affect your ability to save money for the future?
Savings are made out of income net of taxes. The amount of taxes that an individual has to pay depends on his filing status. Besides, one has to know the deductions from gross income that, he is able to make, to arrive at the taxable income. Further, he has to know the impact of taxes on various types of investment incomes. Hence, it is important to know how taxes affect one's ability to save.
3] Why do many people avoid the topics of taxes more than other areas of personal financial planning?
Tax laws are generally complicated and one has to go through a lot of tax literature in the form of IRS codes to understand its implications. It is time consuming and requires in depth understanding of the codes to know how they would apply to oneself. Most people, for many reasons, are not prepared to undergo the rigor of understanding tax laws. Hence, topics of taxes are avoided by most people.
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