Taxes in USA are collected by the Internal Revenue Service (IRS) which is the federal agency. For services rendered by the government, taxes are recovered from the party getting benefited from such services. Income tax, Sales tax and Property tax are the three basic types of taxes. The US citizens and residents pay taxes to the different classes of government- federal, state and local.
Taxes arising from wages, business, gifts, sale of property, etc. are referred as taxable income. In USA such taxable income attracts income taxes payable to federal government. Sometimes such taxes have to be paid to state and local governments also. Income of a person determines the quantum of income tax to be paid. The more the income the more is the income tax. For salaried people, income taxes are usually recovered from their salaries. Returns for taxes have to be compulsorily filed by all US residents with incomes and income taxes have to be paid by them if they satisfy certain provisions. A Federal income tax return in Form 1040 has to be filed by the taxpayer every year with the IRS.
The return is a statement of income earned during the financial year and the amount of taxable income. Taxes due are recovered after adjusting for the income taxes already paid by the person from his salary. If income tax already paid is more than what is due, there is refund from IRS. Whatever income tax has remained unpaid has to be paid to IRS. Taxes on social security benefits and medical care are federal taxes that are recovered from one’s income. Social security taxes are required to be paid for Social Security benefits given by the federal to certain categories of retired workers and their dependent family members.
Social Security benefits are also given to people who are disabled and cannot perform normal work to sustain their families. Dependent family members of a deceased worker also get benefited from Social Security. Senior people above 65 years of age are in need of maximum medical care and Medicare benefits are given to this category of people. The funds for rendering such medical services to aged people come from Medicare taxes. To be eligible for retirement benefits under Social Security and Medicare, a person must have worked for at least 40 quarters (not necessarily for a continuous period of 10 years) during his or her life.
This is not applicable for the Social Security benefits under disability or death of the worker where the benefit goes to the dependent family members if their incomes are not adequate. In USA sales taxes are not federal but local and state taxes. Such taxes are attached to the prices of certain commodities. The cost of the commodity determines the amount of sales taxes to be applied. The funds generated from sales taxes go towards services rendered by the state and local governments for the benefit of the people like police, firemen and roads.
The residents of USA have to pay property taxes for their houses and lands also to the state and local governments. Property taxes in most of the cases generate funds for aiding public schools and other services under local governments. Taxes assessments done in USA are for the period 1st January to 31st December every year. The Federal form listing incomes and taxes during the last income tax year is known as W-2 Form. As per laws of USA, an employee must receive his W-2 form from the employer each year within 31st January for due submission to IRS along with the Federal Income Tax Return.
