Income Taxes

Income taxes are a type of tax that the federal government will receive from people’s earnings at either a local, state or federal level. The amount that a particular class of society should be taxed has always been up for debate, and governments have imposed progressive, proportional and regressive taxation methods. While progressive is mainly focused on taxing the rich more than the poor, regressive taxation seeks to impose less burdens on the rich. Proportional taxation is simply based on a percentage of one’s income for both the wealth and the poor. The concept of ‘income’ is one of the more important factors in income taxation, and it can be more loosely defined to include some necessary exemptions or reductions.

There are several different types of income taxes. The most commonly known type is called a personal tax, where a certain percentage of an individual’s salary will be extracted by the government. Certain tax exemptions are primarily applied to people who use more positive income-use-patterns that the government wants to promote. Giving to a local charity, for example, can be rewarded with a tax cut. That is not to say that income taxation is limited to the individual. Corporate taxes are also paid by for-profit entities or companies, and the amount they have to pay is usually based on a progressive taxation system to promote small business growth.

Income Tax Basics

Filing Status

To properly file your taxes, you must carefully follow the steps, as any disparities in your filing may result in a government audit. First, you will need to figure out your filing status. This can be determined by figuring out your marital status, citizenship status, as well as the year of your spouse’s death, if necessary. This will let you figure out what tax credits you may be eligible for.

Choosing your Tax Form

Next, you must determine the simplest tax form for filing. Ever since computers have become a norm in the average American household, taxes have been filed mostly via e-forms. There are two main e-forms that you can use, depending on your income. If your income is below $100,000 a year, your interest income at $1,500 or below, and you do not have any dependents, then you will use the 1040EZ form to file your taxes. This form should also be filed by those whose filing status is ‘Single or Married Filing Jointly’.

On the other hand, if you have capital gain distributions, can claim certain tax credits, and your income has been affected by student loans, then you should file using a 1040A form. For those whose incomes are above $100,000 a year and report income from self-employment or property sales, then you can file for a 1040.

Figuring Taxes and Credits

Next, you must figure out what tax credits you and your family may be eligible for. One of the most important contributors to tax exemptions are children. The higher percentage of one’s income is devoted to a child, the higher one’s tax exemption will be. This incentivizes people to put their income into their children, and credits are also given to put more money into education.

There are also exemptions for people who either need assisted care or who attend to people in need of care. Reductions in income tax incentivize the helping of the disabled and elderly, and it also helps those working with a disability.

There are also earned income credits (EIC) available for people who have received a certain amount of income in relation to the number of children they have. This is done to help support those who want to raise larger families but may not have the proper means to support all of their children.

Dependents and Exemptions

Taxpayers may receive exemptions for the amount of dependents they have, and these exemptions can provide you with deductions of up to to $3,800. These dependents include spouses and children, but the IRS is stringent about identifying these people, and they too may need to identify themselves to the government.

Payment

To file your income tax return, what you need to do is go to the Internal Revenue Service website and fill out the provided form. You will be able to either pay via debit or credit, or rather contact the IRS to set up an installment agreement, which will allow you to pay in increments. There is also the option of an “offer for compromise”, where you may be able to pay less, but doing so requires strict requirements.

Conclusion

Failing to pay may involve tax levies and even summons to court. In extreme cases, failure to pay may result in the seizing of property and jail time. Fortunately, though, the payment process has improved a lot in the past decades.Taxes are generally known as being notoriously complicated, but the use of an online database has eased the process quite a bit.