Income tax is the principal source of revenue for the federal government. It is administered by the IRS or the Internal Revenue Service, and almost all citizens of the country are required to file a tax return every year with the IRS and pay taxes throughout the year. These taxes are in the form of payroll taxes which are deducted from the paychecks. In this article, some important facts regarding income tax are discussed. Rate The rates of income tax in the country range from 10% to 37%. But the tax burden can be lowered if the taxpayer claims tax credits and deductions. The country follows a progressive income tax pattern, which means the more you earn, the more you will need to pay to the government as tax. Every income bracket or range is taxed at a specific rate, and people in the high-income group pay the highest rates of income tax. There are different categories of taxpayers based on their social status, whether they are married or single or the head of their family. These are also known as “filing statuses.” For married working couples, there are provisions which allow the couple to pay their taxes jointly. They can even file their taxes separately if they wish to do so. Lowering the tax burden Income tax is calculated on the taxable income and not on the individuals’ total income. After calculating the gross income of an individual, certain adjustments are made to arrive at the AGI or the adjusted gross income. Then, the deductions for which the individuals qualify are subtracted to arrive at the taxable income which is much lesser than the total gross income. So, now, the taxpayer falls in a much lower tax bracket than before, and their tax burden is lowered to a great extent. Again, the rate of the standard deduction in the country varies according to the filing status of the taxpayer. For example, for a single taxpayer, the standard deduction is $12,000. For married couples filing jointly, the standard deduction is $24,000. For married couples who are filing separately, the standard deduction is $12,000. The head of the family has a standard deduction of $18,000. Itemized deductions are no longer good for taxpayers as the new law has nearly doubled the standard deductions. Timely tax payment Paying your income tax on time saves you from paying extra for filing it late. You can also pay your income tax with a credit card to avoid late payments and get credit rewards. There are three payment processors that the IRS has licensed to accept credit card payments on their behalf, that is Pay1040, PayUSATax, and OfficialPayments. IRS also helps taxpayers in circumstances like if the taxpayers are not able to pay the full tax at one time, IRS can either extend the time period or even delay the collections. But the taxpayer will need to pay the penalties for overdue.
