TAXES are an unavoidable part of everyday life. The Internal Revenue Service (IRS) is the chief taxing agency of the United States and collects taxes from individuals, corporations, non-profit organizations and even businesses to help support the nation. A tax is basically a compulsory financial burden or any kind of tax levied on a taxpayer by a government agency in order to finance various public services and government spending. evasion of or failure to payment of taxes, and its related penalties, is legally punishable by law.
There are two basic types of direct and indirect taxes. Direct taxes are usually a percentage of income or wages and are normally collected by the employer directly. Indirect taxes are taxes that are indirectly related to an individual’s income or possessions, but do not directly result from work. Examples include income taxes, gasoline tax, and property tax. A very important branch of taxation is profit and loss determination, which determine the amount of tax an individual must pay for a business or entity. The IRS attempts to remain impartial in assessing the liability and potential recovery of an individual or company for federal and/or state taxation.
In most cases, there are progressive taxation rates. These rates change according to a person’s ability to collect taxes. Examples of progressive taxation include the payroll tax, income tax, gift and inheritance tax, estate tax, and corporate tax.
Sales tax, otherwise referred to as a “vat,” is collected by retailers who sell products to consumers at a fixed price. A VAT is based upon the prices at which the items sold by the retailer are sold and are usually implemented during the purchase process. A VAT is charged at a rate of fifteen percent on most items including food and clothing. In the European Union, the VAT is administered by the European Central Bank. In the United States, sales tax collections are deposited with the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives.
The revenue derived from indirect taxes such as Excise Taxes, Branch IRS, and State Excise Taxes, are referred to as taxable income. Taxation of revenue obtained from Excise Taxes is dependent on the type of tax, and can be collected in one of two ways. The first method, known as base tax, is the portion of the sales price that is attributable to state or local taxes. Base tax is assessed on the basis of an estimate of sales volume over a designated period. The second method of indirect tax collection, referred to as establishment tax, is assessed when the producer or distributor of a product passes through a retail outlet and deducts the amount of sales tax applicable to the goods sold.
Income taxes, otherwise referred to as personal or corporate taxes, are collected by individuals and corporations based on their earnings and payments. The Internal Revenue Service (IRS) determines income tax liability using a complex set of guidelines. Private, state, and local governments may also levy public services, such as education, health care, housing assistance, public utilities, and road infrastructure.