income tax

The federal income tax is simply a tax that the United States government collects from people, based on the amount of money they earn each year and other requirements.

The federal government office responsible for collecting taxes and deciding the processes for their return is the Internal Revenue Service (IRS).

Not just individuals, but firms, SMEs, incorporate company in USA, trusts and other types of profit, including independent contractors, have to file income tax returns in the USA.

Federal income fiscal tax is levied on individuals. Capital gains, hourly earnings, fees, and all taxpayers’ incomes are combined in order that federal tax is reported.

Total revenue is referred to as gross income and is not only part of this income to be regarded as a whole for taxation.

The common rule is that income tax is collected directly from each person’s wages. The amount that is deducted depends on the employee’s input when making his W4 form for his employer. Workers do not see that money, but on their pay stubs, they can see the amount of money that is withdrawn.

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At the end of each tax year, taxpayers receive a W2 form. There the calculation of the earnings is made and with that information, the taxes are presented to the IRS.

  • If you owe less than what was collected from your paycheck, you will be entitled to a tax refund, which will be delivered by check or through direct deposit into your bank account.
  • If you owe more, then you will need to make a tax payment to the IRS for the difference. 

If you are a taxpayer, but not an employee of a company, because you are self-employed, you must also file your taxes with the IRS. In these cases, you need the 1099 form, which is prepared for you by the companies or people for whom you do a job or service.

On the other hand, although companies and small businesses must deduct taxes from their employees and report them, they also have to declare taxes on company profits.

Who has to pay taxes in the United States?

Any person, company, business, or self-employed person who has generated an income or profit, during a tax year must report their federal income taxes to the IRS.

Taxes for trusts, estates, inheritances, interests, investments, lottery winnings, unemployment benefits and other forms of entry are also reported.

Qualify as taxpayers:

  • U.S. citizens (by birth or naturalized)
  • Resident foreigners and non-resident foreigners.

For tax matters, the IRS does not consider a person’s immigration status to limit their duty to pay taxes. The general rule of thumb says that if you made or have a profit you must report taxes.

To file taxes, you must use a taxpayer identification number. The options are:

  • Social Security Number (SSN)
  • The Taxpayer Personal Identification Number (ITIN), if you do not qualify for an SSN.

It should be clear that the federal income tax return in USA is different from the state income tax. But most US residents must pay both taxes.

Federal income tax goes to everyone who has earned a minimum amount of money to meet this tax obligation. State income tax can be calculated at the same time as federal tax, but it is paid separately and the rules vary by state.

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