What is income tax?

Almost all governments are financed, at least partially, in some form of taxation to their citizens. Most of these taxes are collected at the time of sale or service, but others are collected at the end of the 12 -month period called Fiscal Year. One such annual fee is often income tax. It is essentially a bill from federal and state governments for individual earnings through salaries and investment profits. This is considered a progressive tax because the financial obligation of the individual rises with the level of income reportable. However, the United States did not always have an official income tax. After years of oppression under the thumb of robbers and corrupt executives, the Congress leaders from the early 20th century created the National Income Tax Act in 1914 to force the richest and the deadliest to pay their fair share. In the end, this reform would run down to the middle and lower workers' classes. Although the tax still remains progressive, many of the richestCH companies and individuals benefit from a number of legal exceptions. Fortunately, the income tax can only be collected for positive income, not a net loss. The basic tax structure allows individuals to earn a certain amount of non -taxable income. This is generally calculated according to the standard amount of deduction listed in federal and state tax forms. If an individual did not earn more than a standard deduction amount (generally several thousand dollars), then he would not owe anything.

The problem faced by gainers is that the wage department is obliged to deduct the specified percentage of money from each payment for tax purposes. Federal and state income tax are deducted according to a specific calculation based on the state of marriage and dependence on the gainful wage. Further deductions of wages are also produced to cover social security (fico) Contribution, insurance, trade union fees and any voluntaryMistens. The amount collected is later listed on the official tax form called W-2. Revenue without such tax deductions may be reported on another form called 1099.

During the tax season, from January to 14 April, individuals must report all their total income from wage and profits from investment. The standard deduction is then deducted from the total number and the rest is considered to be a taxable income. The chart provided by the official tax forms 1040 reveals the actual amount owed by the government. If the amount deducted by the payroll departments is higher than that number, the government will issue a compensation for the difference. If the W-2 number is lower, then the individual owes more income tax and has to pay the internal income service.

For most middle -class taxpayers, income tax is around 15% of their gross income. Individuals and businesses can legally deduct many expenses on their profession, which can significantly reduce this amount. Charity gifts can also be used to equalize POVIncome taxes.