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Income Tax
Income tax is a type of tax that the government imposed on individuals and businesses on the income earned during a financial year. Taxes accumulated from individuals and businesses are considered sources of revenue for the government. The government uses this revenue to provide healthcare, education, developing healthcare, subsidy to the farmer or agricultural sector, and several other government welfare schemes.
The fairness of personal income taxation is based on the premise that one’s income is the best single index of one’s ability to contribute to the support of the government; most personal income taxes are conceived on the theory that when people’s financial circumstances differ, their tax liabilities should also differ.
Individual Income Tax
Individual income tax is also referred to as personal income tax. This type of income tax is levied on an individual’s wages, salaries, and other types of income. This tax is usually a tax that the state imposes. Because of exemptions, deductions, and credits, most individuals do not pay taxes on all of their income.
Business Income Tax
Businesses also pay income taxes on their earnings; the IRS taxes income from corporations, partnerships, self-employed contractors, and small businesses. Depending on the business structure, the corporation, its owners, or shareholders report their business income and then deduct their operating and capital expenses.
State and Local Income Tax
Only states with state income tax impose local income taxes. But, not all states with state income taxes have local taxes. And, not all localities in states with state income taxes impose local taxes.If multiple localities impose a local tax, you may have to withhold or pay both taxes. Or, you may need to withhold or pay the higher of the two taxes.
Service Advantage
Income taxes are a source of revenue for governments. They are used to fund public services, pay government obligations, and provide goods for citizens. In addition to the federal government, many states and local jurisdictions also require that income tax be paid.
