The Income Tax and How to Manage It

Written by Henry Young. Posted in Career & Jobs

The income tax is a tax imposed by the government on taxpayers; basically, as soon as you get employed and start earning paychecks, you also start owing some of that money to your government. The size of the tax depends from place to place, can be influenced by a country’s economy and government plan, and generally varies according to one’s earnings. Each country (or state) determines a percentage which has to go to income taxes out of each taxpayer’s paychecks, so this usually means the more money you make, the more you will have to pay on income taxes.

But it is not just the individuals who pay taxes; companies and corporations pay them too, and in their case, we call it a corporation tax. Partnerships however are not taxed overall, which is why many people choose to create their companies in this form; in their situation, each partner is taxed according to their earnings and shares in the partnership. It can be thus quite difficult to manage your income tax and determine what is the best course of action for you. Even individual taxpayers have to know their legislation well and see how, depending on their various characteristics, they fit in a certain category that pays more or less on their income tax. It is mostly non-profit organizations and charities which are exempt from paying the income tax, but these can cover a wide variety of organizations, such as religions and churches as well.

One thing that you have to be careful about is finding out exactly what you owe the government in income taxes, and this is something you should deal with immediately as you get a job. In some countries, this tax is automatically deducted from your paycheck, but in others, such as the United States, you pay everything once a year, in April. This is the month when all Americans get wired because they must calculate their income tax and fill out the 1040 form to submit their taxes. Yet in some cases, they may benefit from various income tax deductions; for instance, people with a disability, such as blind people, can benefit from a standard tax deduction, there are certain education tax breaks, tax deductions for job expenses for people like artists, who invest a lot of their income on materials and promotion, for instance.

If these financial matters seem or are complicated to you, or you need to calculate tax for more than one income source, then you should think about efiling for next year to save money. This method of managing your income tax not only ensures that you pay everything you owe, but that you benefit from all the possible and available deductions as well. It can be difficult to make sense of all these financial aspects, especially if you have a family and children and need to consider them when filing for your income taxes. It is thus even less likely that you will find it easy to do your taxes, but with external help, you can actually save money and pay strictly what you owe.