What is Federal Income Tax?

, , Leave a comment

What is Federal Income Tax?
Federal income tax refers to the tax system by the US IRS or Internal Revenue Service. Taxes are computed based on a person’s earnings for a particular year or fiscal period. Most people that have some form of income must pay the government his/her income tax through the IRS.

The US government started collecting income taxes in 1863. During that time the tax to be paid is 3 percent if the person earned 600 to 10,000 US dollars. A higher tax rate was imposed for incomes higher than 10,000 US dollars. Some years later, the income tax rate was fixed for all earning brackets. And there were also years, that the income tax system was halted. It was only in 1913 when income taxes were permanently deducted from people’s incomes.

Today, the system works by filing income tax returns with a deadline on April 15th every year. Those who have incomes above USD 7950 and are single are required to file a tax return. Married individuals with incomes of USD 15,900 and above are also required. Incomes below these ranges may opt not to file a return, as it is not required by IRS. There are also various standard deductions for income taxes pertaining to marital status and age. Usually higher deductions are applicable to those who are married, 65 years and older, head of the family, widower, or blind.

Contributions to various charities may also be deducted from a person’s income tax. These organizations must be “qualified” by the IRS though for legitimacy in filing your return. Services rendered to these organizations may also be filed as deductions as long as these particular services were not reimbursed or were not personal expenses.

Income tax return forms are usually sent to companies at the beginning of the year and by January employers are expected to mail the tax forms to individual employees for filing not later than April 15.

Tea Time Quiz

[forminator_poll id="23176"]

Leave a Reply