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The United States government collects taxes in order to fund Social Security, defense, and other programs and operations which the government views as vital. The amount of tax for which each person or business entity is responsible is considered a tax liability. Following are a few key features and considerations regarding your tax liability.
Significance
The U.S. employs a pay as you go tax system whereby taxpayers pay tax as they earn money. Employees have federal tax withheld from their paychecks while self-employed persons are expected to make quarterly, estimated tax payments. The amount of tax owed is based on income, deductions, and credits.
Features
During filing season, taxpayers file returns which determine whether they overpaid or underpaid their federal tax. The amount of tax for which a taxpayer is responsible is listed in the IRS tax tables. This, in turn, determines whether they're owed a refund or owe a government additional tax.
Considerations
The tax law rules which govern credits and deductions (which lower tax liability) change from year to year. Taxpayers should consult irs.gov for the most up to date information.
Warning
Tax evasion is illegal. Taxpayers are only allowed to reduce their tax liability by making payments or taking deductions for which they are eligible.
Exceptions
A filing requirement is the amount of income a taxpayer can earn before being required to file a return. Taxpayers who earn less than the amount required to file have no tax liability.
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