Taxes

Personal & Business Taxes In The United States

Taxes are a fundamental tool for every country to increase moderately predictable income, improve its relationship with the macroeconomic cycle, favor the redistribution of income in society, and provide citizens with infrastructure and basic services, such as health and education.

Taxation strengthens democracy and accountability on the part of governments and encourages citizen participation in political processes, urging that tax revenues be invested intelligently in achieving the common good.The United States of America has tax rules incorporated into its legal system, including income tax and customs tax, as the longest-standing.

The tax system has had to evolve in its structure, adapting rapidly to the globalization of economic relations that develop between individuals and States, the transformation of international business and finance, political and social conditions, and the technological advances with direct impact on taxpayers and the administration. This brief content will be focused on income tax in the U.S., what you should know and what kinds of income taxes are available, and their differences. However, before that, why should you pay tax?

Income Tax In The U.S.

An Income Tax is a tax imposed by the U.S government on a financial gains of cooperation’s, persons, or other legal entities. The income tax department is governed by the IRS (internal revenue service). Preparing your income tax has many benefits like it is fast, easy, accurate, and convenient.

Income Tax will be calculated on tax payer’s income. There are two types of income, Ordinary Income, and Capital Gains. It is worth it to know that Ordinary income typically includes compensation or payment for personally rendered services like wages and monthly salaries, profits from businesses, and interest gotten from invested funds, while Capital Gain generally and specifically comes from the sale of an investment property.

The following incomes are considered as taxable incomes:

  • Some social security benefits and pensions
  • Employment-related allowances and benefits
  • Some earned income
  • Some fringe benefits, for example, company cars.
  • Some occupational pensions
  • Interest on some types of savings

Why Pay Your Income Tax?

The reason why you pay taxes is linked to the fact that this money is used to finance and improve the services that the government offers to citizens, thus paying for some expenses of the population to build, improve and renovate:

  • Public educational entities
  • Public health centers
  • Road infrastructures
  • Means of public transport
  • Collective security
  • Caring for the environment
  • Pension expenses
  • Urban and rural cleaning expenses
  • Potable water supply
  • Conservation of assets and other public services that benefit and improve each citizen’s quality of life and that are for common use.

In other words, paying taxes constitutes each person’s contribution for the improvement of the services that the nation provides to society in general.

Personal & Business Taxes In The United States

Tax payers have to pay Federal Income Tax and State Income Tax.  Again, there are two types of income taxes in the United States: the individual income tax and the corporate income tax.

The personal income tax, also called the personal tax, is a tax on a person’s earnings. The corporate income tax is a tax on the profits of a corporation.

Income tax rates differ, it can be progressive, flat, or regressive. A progressive tax is uniquely differentiated inline with how much income that is being earned. A flat tax rate is determined by all earnings at the same rate. A regressive income tax for income up to a certain specified amount, like taxing the first $20,000 earned by the taxpayer.

A tax system may use different taxation methods for different income types, but when the tax is imposed on the companies, it is often called a corporate tax or corporate income tax or profit tax. The United States imposes a progressive tax on the taxable income of individuals and businesses.

Notable Differences Between Personal & Busness Taxes In The United States

  • Corporate or business taxes have an extended filing deadline, unlike personal tax.
  • Unlike personal taxes, various unique business/corporate tax returns can be chosen.
  • Business taxes features more tax deductions than personal taxes.
  • The rates for business tax are different from personal tax rates.
  • You’re solely responsible for your business tax.

Taxes are the lifeblood of every nation. There are different types of taxes being paid in the United States, and they are all important. Income taxes are also a huge revenue source for the government to carry out their duties as expected.

In the United States, the IRS (Internal Revenue Service) relies on taxpayers to comply with the law and voluntarily calculate and pay their taxes. In 2002 the IRS handled about 131 million federal personal income tax returns and almost 6 million corporate income tax returns.

The agency also monitors tax evasion, In some cases in which corporations or individuals illegally avoid paying complete or some of their required income taxes. The IRS may audit