- September 28, 2021
- Posted by: Sushil Kumar
- Category: Budget and Goals
What are taxes?
Taxes are the money that the citizens of the United States and other countries must pay the federal, state and local governments. This money is used for the payment of the services the government offers.
Taxes are as ancient as society. When hereditary monarchies existed (800 a. C) there was a powerful nobility owner of all the land and only the ones who contributed with personal assets to the public and social expenses.
In Rome, the Republican Government was constituted by two consuls. At the time, the contributors were classified according to the importance of their earned patrimonies or by their industries, but on most cases every person had to hand in equal parts. There was also a territorial tax that was allocated proportional to the value of the fixed property and tithes or the tenth part of the results of the land were required. In the Roman roads, a toll was collected so that people had the right to enter the cities and to cross the bridges.
In the case of the United States, in July 1862, while the Civil war took place, President Lincoln and Congress gave birth to the Office of the Commissioner of Internal Revenue and established an income tax with the objective of financing war expenses.
For the year 1918 the Bureau of Internal Revenue started to use a different name “Internal Revenue Service” who was only formalized in 1953.
“Taxes are as ancient as society. When hereditary monarchies existed (800 a. C) there was a powerful nobility owner of all the land and only the ones who contributed with personal assets to the public and social expenses.”
According to the United States¨ Government you can identify three types of taxes:
- State Sales Tax:
The state sales tax is the payment done when you purchase products or services. Take into account that depending on the State, the tax rate may vary; there is an exception in Alaska, Delaware, Montana, New Hampshire and Oregon in which this type of sales tax is nonexistent.
Did you know that some states have some days in which purchases are tax free? In these states, you can get certain products without paying state tax, whenever these purchases are made in the established dates.
If you want to answer any question about the state sales tax, you can do it through the state agencies of consumer protection.
Florida´s law requires a minimum of 6% for the State; however, each county can decide the tax percentage to be collected from their residents.
Value Added Tax:
This type of value added tax or VA, is a percentage of money included in the value of the product. If you visit a country that gathers VAT, you can request that you be excluded of this payment or that this money be reimbursed. This request must be made once you are going to leave the country, since it will not be possible once you have left.
- State and Local Tax:
States determine the way in which they collect these taxes. Most of them collect an income tax and you can prepare your tax return in conjunction with your federal one.
If you want to answer any question about the taxes that apply where you live, you can visit your states´ website. You can also check due dates for your tax returns and the requirements to do so.
There are other types of taxes applied to payroll. There taxes reference the money retention that must be done to the employees for the payment of the following taxes:
The federal income tax withholding: It is a percentage that the employee must retain over the employee´s income.
- The Social Security and Medicare Taxes: The tax of the social security pays for the benefits that the employee receives under “FICA” that covers the insurance for old age, handicap and survival. Medicare covers the medical insurance.
- The federal taxes for Unemployment: (FUTA): This tax covers unemployment for those who lose their job. If you have any questions you can visit the IRS website www.irs.gov