A tax is any monetary payment or other sort of legal levy charged upon a taxpayer by a government agency in order to finance various publicly undertaken activities and government spending. Evasion of or refusal to pay, and related criminal offense, is punishable by severe punishment by the Government. In the United States the Internal Revenue Service is the chief tax collecting agency. The agency is also called the IRS. The Tax Laws are a codification of the existing federal income taxation laws.
Federal and State taxation is the major source of revenue for the U.S. Many forms of indirect taxes are levied at the state and local levels. Some of the most common indirect taxes are: Sales Tax, Property Tax, Unemployment Insurance, Franchise Tax, Excise Tax, Education Tax, Income Tax, Medicare, Medicaid, Federal Family Education Loan, Surtax, Obtaining Federal Trade Commission licenses, and Licensing and Registration Fees.
There are several different types of indirect taxes. The most common type of indirect tax is the Excise Tax. It is levied when goods or services sold are sold below market value. The retail price of a good is not enough to show its true market value. Other indirect taxes include: Impersonation Tax, Stamp Tax, and Pitman Tax. Another type of tax is the Franchise Tax, which is often imposed by franchising companies on the sale of their franchises.
Most progressive taxation systems, including the U.S. system, use a proportional tax system. This means that a certain percentage of the gross receipts are applied as a tax on the basis of a predetermined scale. Progressive taxation systems typically require individuals to pay a minimum amount of tax on all taxable sales. However, some progressive taxation systems allow an individual to choose which percentage of his or her gross receipts will be taxed.
Proportional or regressive tax systems differ in the way the income tax base is calculated. A proportional tax system taxes income more heavily as you make more money. On the other hand, a regressive tax system takes income taxes off of the bottom rung of the income distribution and provides those with low incomes with lower rates.
In order to determine your tax bracket, you must first look at your AGI and then take the standard deduction and apply it to your AGI over each year. The standard deduction is the amount that you are allowed to deduct each year. After applying the standard deduction, look at your taxable income minus your personal exemptions and apply it to your AGI. Your AGI then turns into a taxable income. Your taxable income will be the amount that you are required to pay tax on.
There are several ways to structure the way you deductions are taxed. You can choose to have all of your income taxes rolled into one big “carrying” tax bracket, or you can elect to have all of your income taxes charged per occurrence. One of the most popular ways to Dodge taxes is to have a separate bank account that is specifically earmarked to receive deductions only upon depletion. In addition, many people elect to exclude certain expenses from their annual return. All of these strategies mean that you can actually have an “inactive” tax status, in which case the Internal Revenue Service does not have any means of collecting the money that you owe them.
Another strategy that many taxpayers use to minimize their tax liability is to control and or eliminate their expenses. Many taxpayers who incur expenses on their own are unaware that they can qualify for tax relief. For example, expenses such as home office furniture, medical bills, transportation, and child care can be deducted. Many taxpayers who maximize their deductible expenses and reduce their overall taxable income actually end up paying less in taxes than they would if they had paid their entire income tax bill.