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Calculating Your Income Tax Quickly

A tax is an unlawful financial burden or any kind of levy imposed upon a taxpayer by a government agency in order to finance various public expenditure and government spending. Failure to comply, and/or evasion of or refusal to pay taxes, are punishable by criminal law. The word “tax” comes from the Greek word thus meaning “charge”, and it is used generally to refer to any sort of tax or payment. In the United States, taxes are collected by the Internal Revenue Service (IRS), a government agency, under U.S. tax law. A tax is imposed by law, when an individual or business takes payments or pays an amount to the IRS. Any amount not paid in a timely manner may result in interest or penalties being assessed.

There are two kinds of taxes: direct taxes and indirect taxes. A direct tax is a tax that is levied against a person or entity and paid directly to the government. Examples of direct taxes include income taxes, property taxes, and payroll taxes. Indirect taxes include estate taxes, dividends, nonjudicial taxes, stamp duties, and patent taxes. Indirect taxes can be imposed for many reasons, including promoting the efficient management of public finances, reducing revenue burdens, providing revenue for the support of education and government programs, and providing tax relief for individuals and business owners who cannot afford insurance or other types of taxes.

While many individuals and businesses pay their fair share of taxes every year, others may choose to evade or minimize their liability for tax by doing business in a foreign country or by structuring their transactions so they don’t owe much to the IRS. Business entities may employ accountants, tax attorneys, and international tax advisors to help them navigate the complex world of indirect taxes. Many techniques exist for structuring your business to reduce your potential liability for U.S. tax. For example, buying foreign assets and selling them for a profit can result in a much smaller U.S. tax bill each year than you would pay if you sold the same assets in your own country. Similarly, many individuals can use investment funds, partnerships, and real estate to create structures that shield them from the impact of federal income taxation.

Even though you may not be required to pay taxes, it is advisable to know how you are going to be affected should an opportunity arise to have your taxes due. Knowing exactly what type of tax will be due is essential for budgeting and financial planning. In addition, when you have overdue taxes it is easy to forget about them and move on to something more exciting. However, this isn’t the best way to utilize your resources. The longer you wait to pay your taxes, the higher your tax debt will become. If you have children in day care or other educational institutions, you may be required to pay indirect taxes on their behalf.

It is very important to understand the difference between income tax and sales tax. Income tax is what you are directly paying from paycheck to paycheck and is usually what people think of first when they consider taxes. Sales tax is what is being paid on the sale of products and services while indirect taxes are what is being paid at the moment a product is purchased or sold. When you purchase any item, you are indirectly being taxed even if it is a personal item. A retail store just like a grocery store can be considered a seller of goods, which means that they must pay taxes on the sale of the product to the government.

When you calculate your income taxes or your annual budget, you will need to know exactly how much you are being taxed because you may be surprised by how much indirect tax is being charged to you. For example, you may have been told that you would have to pay 10 percent of all of your purchases, but you only have to pay five percent. When you take into account the extra money that you have to pay for sales tax and the extra money that you have to pay for income tax you will quickly see that you could have paid an entirely different salary if you were not paying direct taxes. By calculating your income tax yourself and comparing it to what you are being charged with your income, you will soon see that you are saving hundreds of dollars in taxes all year long.

Author

Peter Conley

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