Most of us don't spend our days actively studying the tax code. But there are certain basic tax facts you should be aware of, since having that knowledge could help you make smart money-saving decisions throughout the year. But in a survey released in early 2019, a large number of Americans proved themselves unaware of some essential tax concepts. Here's what those facts entailed -- and what you need to know about them.
1. The standard deduction
If you don't know what the standard deduction looks like, you won't know whether it makes sense to claim it versus itemize on your tax return instead. For the current tax year, the standard deduction is $12,200 for single tax filers, and $24,400 for married couples who file a joint tax return. In 2020, however, these numbers are increasing to $12,400 for single tax filers, and $24,800 for couples filing jointly.
Here's what this means: If you're single, you'll need more than $12,400 in itemized deductions in 2020 for itemizing to make sense on that year's tax return. If you own a home that you pay a lot of mortgage interest on, and have high state and local income taxes, then itemizing could be the right move. Otherwise, the standard deduction could be your greater source of tax savings.
2. The tax filing deadline
The tax filing deadline is generally April 15 unless that date coincides with a weekend or holiday, in which case it's moved back a day or so. As such, your 2019 tax return will be due on April 15, 2020. It's important that you get your taxes in on time to avoid penalties for lateness, so if you're the type who tends to slack in that regard, mark your calendar for mid-February to start working on your return. By then, you should expect to have all of the forms you'll need to complete that return, like your W-2 from work or 1099 forms for various types of income you may have earned throughout the year.
3. How tax extensions work
If you can't complete your tax return in time for the April 15 deadline, you can request an extension that gives you six more months to submit it. You don't even need to come up with a good reason for wanting more time -- just ask, and the IRS will say yes.
One thing you should know, however, is that a tax extension won't give you more time to pay your taxes; it only buys you more time to get your return in to the IRS. If you owe money on your taxes, you must submit that payment by the original filing deadline or else risk penalties and interest for submitting it late. However, if you owe money on your taxes but file an extension, you'll avoid the very costly failure-to-file penalty, which could otherwise apply on top of the penalty for being late.
The more you read up on taxes, the better equipped you'll be to save money, or avoid losing money to the IRS. The tax code went through a major overhaul back in 2018, so at the very least, read up on how the rules have evolved to see how they might impact you.