A Brief Overview On Different Types Of Taxes

There are several things that you must know about different types of taxes. Though no one likes to pay taxes, there are certain legal requirements that you must fulfill. The logic that tax supporters often give is that the money collected from taxes is used to strengthen the country on federal, state, and local levels by using it on various welfare projects and community programs. How much of that money is genuinely used in those programs is however still a matter of debate. A few states do not charge income tax from their citizens, but they do charge other taxes. It is important to note that income tax is not the only form of taxes. There are several other types of taxes also. Following is a brief rundown on it.

Sales Taxes

Sales taxes are probably the most common among different types of taxes. State and local governments use the money thus collected to improve services, such as medical, fire, and police. The laws however significantly vary from one state to another. For example, Pennsylvania imposes 6%, Montana and Alaska 0%, Colorado 2.9%, Alabama 4%, and California 7.25% (which is the highest sales taxes in the United States of America).

Property Taxes

US citizens are also required to pay property taxes on land and properties that they own. The legal provisions in this regard also vary widely by state. As per the latest report, the states that are ranked within the top four percentile for the highest amount of property taxes include Wisconsin, Colorado, Vermont, and New Jersey. Different types of taxes are used on different projects and programs. The money collected from property taxes is used by the state and local governments to fund public school programs.

Federal, State, And Local Taxes

Most of the government projects are funded by federal, state, and local taxes. The Internal Revenue Service regulates these types of taxes. These taxes are charged on individuals on the basis of their income. The higher the income, the higher percentage rates apply (and vice versa).

Income Tax

Federal government charges income tax, but state and local governments also have the right to charge additional taxes. It is legally mandatory for all citizens to pay these taxes as per the tax brackets they come under. Taxable income includes self-employment earning or any other earned wages. The government in most cases deducts it from the monthly or weekly wages of the individuals. Employers are supposed to make the wages payment after deducting this amount. The final calculation is then made at the end of the year when W2 forms are filled.

Depending upon the different sources of income, the kind of assets and properties you own, and the type of business you run, you may be liable to pay different types of taxes. Whatever taxes are applicable, you must pay the same in a timely manner. Hiding income information and not paying taxes in full is considered as a serious legal offence. You can even be sent to jail for this. Therefore, though it is quite okay to use legal strategies to lower your taxes, it is not okay not to pay taxes at all. You can be in trouble if you do so. A couple of years back, the famous actor Wesley Snipes was awarded with a punishment of 3 years of jail time for tax evasion.