Let’s Talk Taxes: Understanding the Basics

Taxes are the government’s financial charge to each individual that is necessary for funding state projects. Many citizens find this obligation a bit of a burden, due to the complex paperwork and financial responsibilities. But what do we get from submitting our taxes? Why does the government impose strict compliance to these charges?

 

Paying your tax is what the law imposes on every member of a country. It should be paid on time by each individual or the employers. If a person or organization resists paying their corresponding tax responsibility, they are punishable by law.

 

Consult with a CPA or enrolled agent regarding tax issues. Speak with an attorney regarding legal issues.

 

 

Becoming a Responsible Taxpayer

If you receive your earnings on a paycheck, you most definitely pay taxes. Your company withholds the amount you owe on your income each pay cycle and delivers the dollars to the proper federal level on your account. However, it’s just the first stage in the process. There’s much more to doing your taxes right and assuring you’re not contributing more than you should.

 

According to law, there are several types of taxes each citizen is entitled to pay.

 

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Income Tax

The government imposes tax based on the profit, net gains, and other incomes of an individual or a corporation. The rates of tax can vary for each individual and is different for various states and countries. Tax collection departments will collect payments as an individual generates earnings. All the taxes collected will be calculated at the end of each year and corrected if your obligation has excess payments.

 

Business Tax

When individuals have a business of their own, filing tax documents and providing their financial obligation to the government is necessary. It’s best to check out some tips for online selling from experts to increase your net profit and learn how to pay your taxes on time. One of the easiest methods to decrease your business tax liability is to make sure you’re taking advantage of all other tax deductions applicable to your small startup company.

 

Social Security Contributions

There are many government-funded retirement or healthcare organizations. Typically, these institutions enable their members to gain financial security in unexpected events, such as health expenses, retirement, and death. Depending on the members’ total contributions, their accounts will mature over time and be ready for benefits. With that said, many people still think that these contributions are forced savings for the future.

 

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Property Tax

Property taxes are the government’s tax on an individual’s real estate, which happens annually. The computation depends on the value of each property to a specific year. When an individual’s property tax is not settled within the time frame that the government declares, the government will impose such sanctions on the owner. If the cumulative penalties and the taxes equate to that of the property’s value, the government has the right to reclaim it and sell it to the public for revenue.

 

Goods and Services Tax

These taxes are also called value-added tax. It’s the money that the manufacturer, distributor, retailer, and consumers will pay to the government to process the so-called goods or services rendered. When the manufacturer imports the supplies necessary for their production processes, they must pay the government a fee for its procurement. If the item is a local product bought by the wholesale distributor, they will also have to pay a tax amount. More so, when an individual purchases from a retail store, a small portion of it will go to the taxes. The same scenario happens for rendering services.

 

Tariffs

These types of taxes are what countries rely on to prevent trade from other countries. The government uses it to protect its market. When another country tries to export or import commodities, they will pay a certain amount to the government to let the items pass through the borders. The money collected is used to maintain peace and order to the boundaries.

 

When an importer or exporter declares a false value of the goods to be imported or exported, the law considers it smuggled goods and punishable by the government.

 

Wrapping Up

Taxes are there because the government needs funds for the projects and other things that will require financial assistance from the government. It will also fuel the local government offices to provide salaries for government workers. For now, taxes are compulsory for all the citizens of the state.

 

Nonetheless, our taxes are there to assure our community of a brighter future. Overall, it is the driving force that helps the country develop infrastructure and economic growth. This improvement, in turn, has a knock-on impact on the nation’s economy, enhancing living standards, encouraging job creation, and so on.

 

Good luck!

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies