Every year in April, Americans are faced with an imposing deadline - tax day. Throughout the year, income is earned and then taxed. Depending on the way in which dependants are claimed and deductibles used, a person would then be entitled to money back come income tax time or they would have to pay taxes. In either case, dealing with income tax forms and laws can be a disturbing prospect.
Keep in mind that the United States lives on a budget just as regular families do. Their money is what pays for highways, national parks, the military, schools, and other important things associated with this country. However, for the government to have a budget in the first place, they have to collect money from individuals and companies in the form of taxes.
For this reason, a certain percentage is deducted from your paycheck, which goes to various entities of the government for their needs. Understanding the tax laws associated with income tax can be confusing but overall, you could break them down into five groups. First, remember that every person is responsible for paying income tax. The amount paid depends again on a number of factors, as well as income earned. The more salary earned the more taxes are paid by you, because you are placed in a higher income bracket.
The good news is that by using a number of tax benefits, you can pay less. Income tax laws require that you pay money out throughout the year, which is known as a "pay as you go" rule. Typically, income taxes would be taken out of your paycheck and then sent on to the government. Then, at income tax time, the amount paid versus what was owed is balanced, which is when you pay to or receive money from the government. In other words, if more taxes were taken out of your paycheck than what you owed, you would receive a refund at tax time whereas if you did not pay enough, you would owe the government money.
You also need to remember that the tax system and tax laws are considered progressive, which means the more you make the more you pay while the less you earn the less you pay. Therefore, your income tax is going to fluctuate any time your income changes. Interesting, many people on Capital Hill argue about this progressive system, feeling that it is unfair. However, for the time being, the tax laws stand although we can be sure there will be changes in the future.
Grant Segall writes about consumer and tax law for the legal oriented website Lawgister.com