The US tax system uses citizenship to calculate taxes instead of where they work or live. Tax duty falls on every US citizen regardless of where they are born, where they live, or where they work. Paying tax in the US depends on your personal situation, and failure to perform your annual tax duty is considered a criminal offense.
The federal and state governments ensure the strict compliance of taxpayers through several forms like income tax, sales tax, capital gain tax, etc. However, they both operate separately and have different rates of taxes. The state level has a separate tax system not sanctioned by the federal government. It has many jurisdictions, each imposing its taxes. For example, some countries or towns impose school taxes as additional taxes. The US tax system is a complicated structure. Here are some taxes imposed by the US tax system.
Income tax is the common form of paying taxes. The system is for those that earn income in the United States. The IRS will deduct taxes from your paycheck. It is mandated to pay income tax on federal and state levels as a citizen earning in the US. The federal government takes taxes from social security and FICA. However, states have different laws concerning taxes, like withholding part of your paycheck. In essence, if you make up to $6,750, you are mandated to pay federal and state taxes before April 15th each year.
Sales tax is another popular taxation method. Sale tax is deducted from purchases such as buying a pack of candy. Sales tax varies in different states and is imposed by states. For instance, New York City has a sales tax rate of 7%, New Jersey has 3%, Albany has 8%, and Syracuse has 7%. In addition, municipalities in states can increase their sales tax and exempt some items from tax.
Individuals are to pay their taxes before April 15th. However, individual and business taxes differ. A sole proprietorship must include earnings while filing personal income tax. For partnership, they must list their partnership income on their personal income tax.
Corporate firms will need to pay corporate tax since they are a single legal entity. The tax rate for corporations is different from personal tax rates. They use the double taxation method, meaning they pay taxes on their income and dividends paid to stakeholders as capital gains tax.
Taxes are used to finance federal government operations in the economy. They made high returns from individual income taxes and payroll taxes. This levy is used to move different sectors of the nation.
Almost every US citizen pays taxes. They have different tax compositions for income distributions in the country. For example, wealthier Americans pay a higher share of individual, corporate, and estate taxes than low-income earners. On the other hand, lower-income earners pay higher taxes in payroll and excise taxes than high-income earners.
The US tax system is progressive, imposing more taxes on high-income earners. In contrast, high-income earners make their gains from tax breaks, also known as tax expenditures. According to the Congressional Budget Office, more than 20% of taxpayers got back 50% 0f their taxes through tax expenditures in 2019, and another 9% enjoyed up to 20%. The top 1% of American taxpayers make their donation, effectively contributing up to 29% on average, while 20% of the bottom population makes an average of 3%.
The US tax system is complex, complicated, confusing, inefficient, and more worries leading to unfairness. However, if taxes are paid, and the procedure is right, the economy will be buoyant.
FOR MORE INFORMATION ON HOW TAXES MADE EZ INC. CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.
THANKS FOR VISITING.
Taxes Made EZ Inc