Classifying tax types and reform law after the economic recession
Classifying tax types and reform law after the economic recession
Tax is an involuntary payment made by a citizen to its respective government. The government uses this money to run the day to day activities as well as invest in projects beneficial for its citizen.
There are several types of taxes and they are collected by the US Internal Revenue Services. The different types of taxes are:-
1) Income tax- Filed using form-1040 by a US citizen. You are eligible for a refund if you have paid more than required. There are 2 types of income tax calculations regular tax and the alternative minimum tax.
2) Corporate tax- They contribute as the federal corporate income tax based on the income of the company in a financial year.
3) Investment tax- taxes have to be paid on receipt of dividends and capital gains (sale of property ie., real estate). In order to avoid capital gains tax certain conditions need to be satisfied by the investor. There are no such criteria for dividends.
4) Excise- There is certain specific items on which taxes are levied like-gasoline, distilled spirits, tobacco, firearms, etc. Its also applied ion air fare and tanning services.
5) Social security (also known as Federal Insurance and Contributions Act) and healthcare taxes- This type of federal tax is taken away at the time of your salary payment itself. A person needs to work for a period of 10 years to get this benefit. It is for the retired workers (above 65 years) and their families.
6) Expatriate tax- levied on a person for surrendering his/her citizenship, green card holders (8-15 years). The Heart Act (2008) substantially modified this tax. It is calculated on the net gain of that person's average income or the net worth of assets if liquidated.
7) Sales tax- They are basically local and state governments' source of revenue.
There is also a voluntary disclosure program in USA where the taxpayer can proactively declare unpaid taxes of the past. For this they will receive certain benefits. After the recession, the government came out with American Recovery and Reinvestment Act of 2009. The act is commonly referred to as the stimulus or the recovery act. The act extensively deals with both financial as well as the non-financials sector.
The employers basically deduct the federal payroll taxes and deposit it to the Internal Revenue Service. The jargon and the complex overlapping between federal and state level taxes is incomprehensible for a common man. In order to avoid penalties and hassles it is advised to approach a Maryland Tax Attorney for a local resident of Maryland.
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