As responsible citizens of our country, all of us have to pay taxes to the Government. We pay taxes so that the government can use the funds to carry out welfare schemes, and employment programs and provide the necessary services to us. With time, the government has developed a more sophisticated system and process for defining taxes and who is taxed and what is taxed. But the underlying principles of taxation remain the same for everyone across the world.
Different countries have different types of taxes applicable to their citizens and depending on your employment status, the country, and the state you reside in, you will be liable for taxes. Before the tax season is upon us, it is time to get your papers ready and learn more about your tax liability. Every country has its own laws and bc speculation tax exemptions which you must be sure of so the correct amount of tax is paid.
As a taxpayer, it is important to be aware of the forms to use and the due date to file your return. Timely payment of dues is important and if you are not careful when preparing your tax return, you could end up paying more tax than due. You can save time and money by using pre-printed tax forms. This will ensure that you fill out the information efficiently and nothing is missing on it. Hence, the process of tax preparation and return filing will become easier and simpler for you.
In this article, we explain everything you need to know about taxes.
Different types of tax different people have to pay
Whether you are a self-employed individual, salaried, or business owner, you will be liable to pay taxes. However, the type of tax will differ. Let’s take a look at the types of taxes different people have to pay.
Income tax: This is the main tax in the US, and it is charged at the federal, state, and local levels. It means you pay a higher tax rate when your income increases. Everyone has to pay income tax, irrespective of their employment type. You could be a salaried employee or a freelancer, you have to pay income tax.
Payroll tax: An employer as well as the employee has to pay the Social Security Tax which is one of the two payroll taxes. Employees have to pay 6.2% of their wages towards the tax and employers have to match it for a contribution of 12.4%.
Estate tax: This is the tax to be paid on the property transferred at your death and it is taxed at the Federal and State level. If the estate exceeds $5.34 million for an individual, only then they will have to pay an estate tax.
Property tax: You pay property taxes on the property you own, and it is imposed by the local government.
Capital gain tax: When you make a profit from the sale of an asset, the gains will qualify for tax. It could be second homes, shares, properties, or other investments.
Tax on dividends: If you own shares in a company, you will receive income in the form of dividends. This income will be subject to tax.
Corporation tax: If you run a business or are a limited company, you pay a corporation tax at a flat rate of 21%.
Do’s and don’t of tax
Taxes can be complex and if you do not know how to prepare your tax return, they could take a lot of your time and effort. Here is the tax dos and don’ts you must keep in mind.
- Remember to check the return before you submit
- Look at the medical deductions
- Keep accurate records of your submissions
- Choose the right filing status
- Look at last year’s return
- Get the wrong tax code
- Get the incorrect Social Security Number
- Wait until the last minute
- Write incorrect contributions
The bottom line
Do not make the mistake of waiting for the last minute. If you need help, speak to a tax advisor, and then fill out the forms so that they are accurate.