In the United States both companies and individuals have a obligation to carry a share of financial contributions provided from their annual income earnings. The IRS or federal government collects income taxes annually by requiring each qualifying entity or individual to file income tax returns. In order to maintain the integrity of the income tax reporting system each entity or person has a obligation to honestly and correctly disclose and report every dollar of income that does or does not impact tax consequences to the federal government.
The contribution of each individual or company via taxes supports many state and federal programs and services that many citizens depend on for daily necessities. Many times individuals and entities file both their state tax returns and federal income taxes at the same time.
In order to educate you on the several tax systems that are available we will review the three major groups which are are regressive, proportional and progressive. Many nations utilize the progressive tax system to ensure proper collection of income taxes. Utilizing this system of gathering taxes means that the more the income that's reported, the higher the tax rate that is used.
The main driving force behind this taxation system is the tax brackets that individuals are put into calculated on their reported income. In this tax system in order to minimize the tax burden requirement, individuals can employ many tax deductions which are subtracted each individuals total gross income. Deductions range from household expenses to specific medical expenses. Keep in mind that deductions are not identical to tax credits. The main difference is that tax credits lower the amount that individuals have to pay in overall income taxes.
In all systems of taxation entities and individual persons must meet the requirement of paying income taxes. However, it is important to note that tax returns for entities have many differences when compared to individual returns. For example, when dealing with corporate taxes, bottom line net income is used to determine taxation instead of the gross income. This is mostly due to business entities having significantly more deductions and expenses compared to the normal person. Expenses can range from purchasing business supplies, marketing costs and office equipment. In order for businesses to keep up with the correct business tax laws they must hire a competent accounting firm. Hiring a accountant firm can eliminate or minimize tax penalties and fees for many businesses.
It is common knowledge that most people despise having to pay taxes, but taxes are an essential component of keeping a country financially healthy and protected for its citizens. In recent history the United States, has addressed the debate of income taxes on many occasions, but then made the taxes a permanent fixture back in 1913. However, there are a few countries with no individual income tax. The main challenge in the US has been the resentment of the length and complex nature of tax codes; but even with the complaints many firms have specialized in income tax preparation through the internet or online.