The development of any nation depends on its infrastructure. Infrastructure is judged by its schools, colleges, roads, parks, building. The resources required for developing the infrastructure is generated from the taxes the taxpayers pay. A percentage of income is taken from the public and companies by the government to make a healthy growth of the economy.
President of United States and Congress is responsible for forming and approving the Laws. The Internal Revenue System is responsible for enforcing these laws. Apart from enforcing law IRS has to collect taxes, process tax returns, issue tax refunds and turn over the money to the US treasury. The treasury regulation (26 C.F.R) is referred as Federal tax Regulations. The Treasury is liable for paying the government expenses.
The expenses are done based on federal budget. The budget is the amount of expenditure Government is planning to incur. So if the budget is more, more tax is required to be collected and vice versa.
The U.S tax laws though have several rules and regulations there are five basic statues every person has to know.
Every individual, company or Partnership firm is subject to the income tax and has to report their income and calculate the taxes. Even if any entity is exempted from tax then also filing of return is mandatory or else the tax-exempt status will be revoked.
Everyone is taxed on the income. The income can be in lieu of salary, dividend, remuneration, interest, wages, and profit. It does not include gift since gift is not treated as income.
The third norm is paying your taxes throughout the year. It means the income taxes are deducted directly and sent to the federal government prior to handing it over to the receiver. So at the end year if any taxes are due the same must be paid to the federal government. If more taxes are paid then the same is refunded.
The U.S taxation system is progressive in nature meaning the more you earn the more tax rate you have to you have to pay unlike the flat rate system prevalent in many countries.
Another aspect if U.S tax is the Tax Deductions, which is essential for tax planning. Availing the deductions based on your eligibility criteria will help to reduce the burden of tax. It is the way of rewarding people for their wise decision by the Congress.
The income tax system is voluntary in nature. It means that one can have their own preferred financial plans to avail the tax benefits. It does not signify that one can evade tax rather one can choose to manage finances so that taxes can be minimized.