Taxation is a necessary and unavoidable tax charged on individuals and businesses alike. A tax is any monetary payment or other sort of levy imposed upon a taxpayer by some governmental body in order to support government spending and many other public needs. A person may be charged with tax evasion if he fails to pay or evade tax. Evasion of tax and payment of tax are punished by law. The penalty imposed upon tax evasion can also be a fine, imprisonment, or both.
Many kinds of taxation exist in the market today. Some taxes are progressive, which increases the rate of tax payable overtime more than the initial amount paid. Some others are proportional, which means that the amount of tax paid varies with the income of the taxpayer. In some countries like the United States of America and United Kingdom, taxes are deducted from taxable income during the year and are then given as a refund. Progressive and proportional taxes include both personal and corporate income taxes.
There are two main types of indirect taxes. These are direct and indirect taxes. A direct tax is something that you directly pay such as property taxes, sales tax, gas tax and cigarette tax. Indirect taxes are payments that indirectly help the government.
Examples of indirect taxes include sales tax, property taxes, vehicle registration fees, and gasoline tax. When a product is purchased, it is the price at which it is sold that causes the retailer to be charged for the price. The money that these taxes aid in are called rebates. This money can either be directly given to the retailer or it can be indirectly passed on through deductions in the price paid for the item.
Assessing an individual’s income tax and filing taxes with the IRS takes time and patience. It requires knowledge about tax law, accountancy, income tax computation, refund calculation, etc. An individual has to have a legal standing to pursue a case in the court. Moreover, an individual who has not paid or is unable to repay his income tax liability is subject to a penalty fine. A person who files for bankruptcy automatically loses all rights to recover his or her debts from the individual or the state government.
There are many reasons that encourage people to avoid paying taxes. One such reason is that they fear the tax inspector or the IRS, especially, the collection tax. The fear of the tax inspectors prevents people from paying their required tax. This results in a double loss for the government. The government has to recover the amount from the delinquent taxpayer, while the taxpayer has to pay tax on the basis of penalties and interest.
Business owners also have to worry about sales tax. For them, a value-added tax on business assets can be very troublesome. One way to minimize or nullify this tax is to use the business’ profits to pay the sales tax. However, the profit made from leasing the business property to the individual or a related firm can be used to offset this income. The lease payment can be used as the income to offset the tax.
The indirect and direct taxes can also affect an individual’s financial condition and status. When a person pays income tax, he receives cash and does not have to pay it again. Similarly, when a person pays income tax, he receives credits and is able to save tax payments every year. He has the choice to pay income tax quarterly, which means that he pays tax once a year and saves the cost. Similarly, people who buy real estate or rental properties may face problems when tax rates rise.