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Many are asking the definition of Income tax in layman’s term. It usually confuses many people and most of them don’t really understand what tax really means. With this article, let us discuss on the basics and definition of income tax. This will give you insights and comprehensive knowledge on tax. Income taxes are charged to individuals and business alike. It is calculated based on the total amount of money that the business or individual earned. Tax systems in most countries are called progressive scale which means that when you earn more, the higher is the percentage of tax you need to pay. In the United States, the highest rate is 38% and 0% is the lowest. Also percentage of business taxes vary on the type of business that an entrepreneur has. For sole proprietorship and partnerships, taxes are calculated based on gross income and number of dependents. While for corporations, a certain percentage is set by the bureau of internal revenue to be deducted on income before tax. As commonly known, individuals are treated same like the business when it comes to tax law. If a person worked and doesn’t earn that much, then his liability in tax is lesser compared to the one that makes millions as their income. The system of progressive tax scale was made in all fairness to the income earners. This concept is that if a person is not earning enough amounts to live then he/she is not liable to pay income tax. On the other hand, when an individual is earning thousands of money annually than he/she is more liable to pay income taxes that others can’t. This tax law is objectively easy to understand. What complicates the issue on income tax is the total amount that is based on the net income. NET means the total amount left after all expenses are deducted. Gross on the other hand refers to the total amount you make prior to deduction of expenses. We are hoping positive numbers here. The government has fixed many various processes to minus money from the tax returns in the form of expense. You can subtract expenses from your travelling expenses, the mortgage payment, office and home expenses, and even particular expenses if you purchase a pet. Having the idea of valid deductions and invalid ones is overwhelming. Fortunately there are affordable companies that popping up all over the world. They assist you in walking through your tax debts, earned money and possible deductions from your income. They usually charge you service fee yet they can help you save the amount of deduction that is worth it eventually. Also, it must be noted that the income tax system varies in different countries. It is a good advice to look for a professional who can give opinions regarding tax laws prior to submission of tax returns. Expectantly after you read this article, you now have an improved understanding of what really income tax essentially is. It is a very overwhelming issue, but with slight learning, it is stress-free to absorb the basics. --------------------------------------------------------------------------------------------------------------------- Ideas In Business - Interested in home business ideas? Part time business ideas? Or perhaps you desire to know how to evaluate a business idea? Get inspiration and online business advice with our start-up articles on business ideas plus business opportunities that may help start up a new online business today. Click here now to know more about the best and most effective plans and tips for starting your business and for your business success.
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Income Tax, What Is Income Tax, About Income Tax, Income Tax System, Progressive Income Tax System, Understanding The Income Tax,
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