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However, taxes fall much more heavily on labor income than on capital income. Divergent taxes and subsidies for different forms of income and spending can also constitute a form of indirect taxation of some activities over others. For example, individual spending on higher education can be said to be "taxed" at a high rate, compared to other forms of personal expenditure which are formally recognized as investments.
Taxes are imposed on net income of individuals and corporations by the federal, most state, and some local governments. Citizens and residents are taxed on worldwide income and allowed a credit for foreign taxes. Income subject to tax is determined under tax accounting rules, not financial accounting principles, and includes almost all income from whatever source. Most business expenses reduce taxable income, though limits apply to a few expenses. Individuals are permitted to reduce taxable income by personal allowances and certain non-business expenses, including home mortgage interest, state and local taxes, charitable contributions, and medical and certain other expenses incurred above certain percentages of income. State rules for determining taxable income often differ from federal rules. Federal tax rates vary from 10% to 39.6% of taxable income. State and local tax rates vary widely by jurisdiction, from 0% to 13.30% of income, and many are graduated. State taxes are generally treated as a deductible expense for federal tax computation. In 2013, the top marginal income tax rate for a high-income California resident would be 52.9%.
Payroll taxes are imposed by the federal and all state governments. These include Social Security and Medicare taxes imposed on both employers and employees, at a combined rate of 15.3% (13.3% for 2011 and 2012). Social Security tax applies only to the first $106,800 of wages in 2009 through 2011. However, benefits are only accrued on the first $106,800 of wages. Employers must withhold income taxes on wages. An unemployment tax and certain other levies apply to employers. Payroll taxes have dramatically increased as a share of federal revenue since the 1950s, while corporate income taxes have fallen as a share of revenue. (Corporate profits have not fallen as a share of GDP).
Property taxes are imposed by most local governments and many special purpose authorities based on the fair market value of property. School and other authorities are often separately governed, and impose separate taxes. Property tax is generally imposed only on realty, though some jurisdictions tax some forms of business property. Property tax rules and rates vary widely with annual median rates ranging from 0.2% to 1.9% of a property's value depending on the state.
Sales taxes are imposed by most states and some localities on the price at retail sale of many goods and some services. Sales tax rates vary widely among jurisdictions, from 0% to 16%, and may vary within a jurisdiction based on the particular goods or services taxed. Sales tax is collected by the seller at the time of sale, or remitted as use tax by buyers of taxable items who did not pay sales tax.
Estate and gift taxes are imposed by the federal and some state governments on the transfer of property inheritance, by will, or by lifetime donation. Similar to federal income taxes, federal estate and gift taxes are imposed on worldwide property of citizens and residents and allow a credit for foreign taxes.
* 1 Levels and types of taxation * 2 Types of taxpayers
* 3 Income tax
* 3.1 History of the income tax * 3.2 Basic concepts * 3.3 Filing status * 3.4 Graduated tax rates * 3.5 Income * 3.6 Deductions and exemptions * 3.7 Business entities * 3.8 Credits * 3.9 Payment or withholding of taxes * 3.10 State variations * 3.11 Non-residents * 3.12 Alternative tax bases (AMT, states) * 3.13 Differences between book and taxable income for businesses * 3.14 Reporting under self-assessment system
* 5 Payroll taxes
* 5.1 Income tax withholding * 5.2 Social Security and Medicare taxes * 5.3 Unemployment taxes * 5.4 Reporting and payment * 5.5 Penalties
* 6 Sales and excise taxes
* 6.1 Sales and use tax * 6.2 Excise taxes
* 7 Property taxes
* 7.1 Types of property taxed * 7.2 Assessment and collection
* 8.1 Import of goods * 8.2 Origin * 8.3 Classification * 8.4 Duty rate * 8.5 Procedures * 8.6 Penalties * 8.7 Foreign-Trade Zones
* 9 Estate and gift taxes
* 10 Licenses and occupational taxes
* 10.1 User fees
* 11.1 Federal
* 126.96.36.199 Examination * 188.8.131.52 Published and private rulings
* 11.2 State administrations * 11.3 Local administrations
* 12 Legal basis
* 13 Policy issues
* 14 History * 15 See also * 16 References * 17 Further reading * 18 External links
LEVELS AND TYPES OF TAXATION
U.S. federal tax receipts for 2014
A federal wealth tax would be required by the United States Constitution to be distributed to the States according to their populations, as this type of tax is considered a direct tax . State and local government property taxes are wealth taxes on real estate .
TYPES OF TAXPAYERS
Taxes may be imposed on individuals (natural persons), business entities, estates, trusts, or other forms of organization. Taxes may be based on property, income, transactions, transfers, importations of goods, business activities, or a variety of factors, and are generally imposed on the type of taxpayer for whom such tax base is relevant. Thus, property taxes tend to be imposed on property owners. In addition, certain taxes, particularly income taxes, may be imposed on the members of organizations for the organization's activities. Thus, partners are taxed on the income of their partnership.
With few exceptions, one level of government does not impose tax on another level of government or its instrumentalities.
Taxes based on income are imposed at the federal, most state, and some local levels within the United States. The tax systems within each jurisdiction may define taxable income separately. Many states refer to some extent to federal concepts for determining taxable income.
HISTORY OF THE INCOME TAX
Income tax in the United States was implemented with the
Revenue Act of 1861 by
Taxpayers are required to file tax returns and self assess tax. Tax
may be withheld from payments of income (e.g., withholding of tax from
wages). To the extent taxes are not covered by withholdings, taxpayers
must make estimated tax payments, generally quarterly.
Taxable income is gross income less exemptions, deductions, and personal exemptions. Gross income includes "all income from whatever source". Certain income, however, is subject to tax exemption at the federal or state levels. This income is reduced by tax deductions including most business and some nonbusiness expenses. Individuals are also allowed a deduction for personal exemptions , a fixed dollar allowance. The allowance of some nonbusiness deductions is phased out at higher income levels.
The U.S. federal and most state income tax systems tax the worldwide
income of citizens and residents. A federal foreign tax credit is
granted for foreign income taxes. Individuals residing abroad may also
claim the foreign earned income exclusion . Individuals may be a
citizen or resident of the
Main article: Filing Status (federal income tax) Historical federal marginal tax rates for income for the lowest and highest income earners in the U.S.
Federal and state income tax is calculated, and returns filed, for each taxpayer. Two married individuals may calculate tax and file returns jointly or separately. In addition, unmarried individuals supporting children or certain other relatives may file a return as a head of household. Parent-subsidiary groups of companies may elect to file a consolidated return .
GRADUATED TAX RATES
Progressive effective tax burden
Income tax rates differ at the federal and state levels for corporations and individuals. Federal and many state income tax rates are higher (graduated) at higher levels of income. The income level at which various tax rates apply for individuals varies by filing status. The income level at which each rate starts generally is higher (i.e., tax is lower) for married couples filing a joint return or single individuals filing as head of household.
Individuals are subject to federal graduated tax rates from 10% to 39.6%. Corporations are subject to federal graduated rates of tax from 15% to 35%; a rate of 34% applies to income from $335,000 to $15,000,000. State income tax rates vary from 1% to 16%, including local income tax where applicable. State and local taxes are generally deductible in computing federal taxable income. Federal and many state individual income tax rate schedules differ based on the individual's filing status.
Gross income and
Taxable income is gross income less adjustments and allowable tax deductions . Gross income for federal and most states is receipts and gains from all sources less cost of goods sold . Gross income includes "all income from whatever source", and is not limited to cash received. Income from illegal activities is taxable and must be reported to the IRS .
The amount of income recognized is generally the value received or which the taxpayer has a right to receive. Certain types of income are specifically excluded from gross income. The time at which gross income becomes taxable is determined under federal tax rules. This may differ in some cases from accounting rules.
Certain types of income are excluded from gross income (and therefore subject to tax exemption ). The exclusions differ at federal and state levels. For federal income tax, interest income on state and local bonds is exempt, while few states exempt any interest income except from municipalities within that state. In addition, certain types of receipts, such as gifts and inheritances, and certain types of benefits, such as employer-provided health insurance, are excluded from income.
Foreign non-resident persons are taxed only on income from U.S.
sources or from a U.S. business.
DEDUCTIONS AND EXEMPTIONS
The share of total income and federal, state and local taxes
paid by income group. Total taxes include income taxes, payroll taxes,
state and local sales taxes, federal and state excise taxes, and local
property taxes. Main article:
The U.S. system allows reduction of taxable income for both business and some nonbusiness expenditures, called deductions. Businesses selling goods reduce gross income directly by the cost of goods sold. In addition, businesses may deduct most types of expenses incurred in the business. Some of these deductions are subject to limitations. For example, only 50% of the amount incurred for any meals or entertainment may be deducted. The amount and timing of deductions for business expenses is determined under the taxpayer's tax accounting method, which may differ from methods used in accounting records.
Some types of business expenses are deductible over a period of years rather than when incurred. These include the cost of long lived assets such as buildings and equipment. The cost of such assets is recovered through deductions for depreciation or amortization .
In addition to business expenses, individuals may reduce income by an allowance for personal exemptions and either a fixed standard deduction or itemized deductions . One personal exemption is allowed per taxpayer, and additional such deductions are allowed for each child or certain other individuals supported by the taxpayer. The standard deduction amount varies by taxpayer filing status. Itemized deductions by individuals include home mortgage interest, property taxes, certain other taxes, contributions to recognized charities, medical expenses in excess of 7.5% of adjusted gross income , and certain other amounts.
Personal exemptions, the standard deduction, and itemized deductions are limited (phased out) above certain income levels.
The U.S. federal effective corporate income tax rate is lower
than the highest nominal rate, which can be significant in part
because of tax shelters such as tax havens . Main articles:
Corporate tax in the United States ,
Corporations must pay tax on their taxable income independently of
their shareholders. Shareholders are also subject to tax on dividends
received from corporations. By contrast, partnerships are not subject
to income tax, but their partners calculate their taxes by including
their shares of partnership items. Corporations owned entirely by
U.S. citizens or residents (
Certain transactions of business entities are not subject to tax. These include many types of formation or reorganization.
A wide variety of tax credits may reduce income tax at the federal
and state levels. Some credits are available only to individuals, such
as the child tax credit for each dependent child, American Opportunity
PAYMENT OR WITHHOLDING OF TAXES
Main article: Withholding tax
43 states and many localities in the
State and local taxable income is determined under state law, and often is based on federal taxable income. Most states conform to many federal concepts and definitions, including defining income and business deductions and timing thereof. State rules vary widely with regard to individual itemized deductions. Most states do not allow a deduction for state income taxes for individuals or corporations, and impose tax on certain types of income exempt at the federal level.
Some states have alternative measures of taxable income, or alternative taxes, especially for corporations.
States imposing an income tax generally tax all income of corporations organized in the state and individuals residing in the state. Taxpayers from another state are subject to tax only on income earned in the state or apportioned to the state. Businesses are subject to income tax in a state only if they have sufficient nexus in (connection to) the state.
Foreign individuals and corporations not resident in the United States are subject to federal income tax only on income from a U.S. business and certain types of income from U.S. sources . States tax individuals resident outside the state and corporations organized outside the state only on wages or business income within the state. Payers of some types of income to non-residents must withhold federal or state income tax on the payment. Federal withholding of 30% on such income may be reduced under a tax treaty . Such treaties do not apply to state taxes.
ALTERNATIVE TAX BASES (AMT, STATES)
An alternative minimum tax (AMT) is imposed at the federal level on a somewhat modified version of taxable income. The tax applies to individuals and corporations. The tax base is adjusted gross income reduced by a fixed deduction that varies by taxpayer filing status. Itemized deductions of individuals are limited to home mortgage interest, charitable contributions, and a portion of medical expenses. AMT is imposed at a rate of 26% or 28% for individuals and 20% for corporations, less the amount of regular tax. A credit against future regular income tax is allowed for such excess, with certain restrictions.
Many states impose minimum income taxes on corporations or a tax computed on an alternative tax base. These include taxes based on capital of corporations and alternative measures of income for individuals. Details vary widely by state.
DIFFERENCES BETWEEN BOOK AND TAXABLE INCOME FOR BUSINESSES
In the United States, taxable income is computed under rules that differ materially from U.S. generally accepted accounting principles . Since only publicly traded companies are required to prepare financial statements, many non-public companies opt to keep their financial records under tax rules. Corporations that present financial statements using other than tax rules must include a detailed reconciliation of their financial statement income to their taxable income as part of their tax returns. Key areas of difference include depreciation and amortization, timing of recognition of income or deductions, assumptions for cost of goods sold , and certain items (such as meals and entertainment) the tax deduction for which is limited.
REPORTING UNDER SELF-ASSESSMENT SYSTEM
Income taxes in the
The state forms vary widely, and rarely correspond to federal forms.
CAPITAL GAINS TAX
U.S. capital gains taxes history Main article: Capital gains
tax in the
Individuals and corporations pay U.S. federal income tax on the net total of all their capital gains . The tax rate depends on both the investor's tax bracket and the amount of time the investment was held. SHORT-TERM CAPITAL GAINS are taxed at the investor's ordinary income tax rate and are defined as investments held for a year or less before being sold. LONG-TERM CAPITAL GAINS, on dispositions of assets held for more than one year, are taxed at a lower rate.
Payroll taxes were among the most regressive in 2010.
In the United States, payroll taxes are assessed by the federal government, many states, the District of Columbia, and numerous cities. These taxes are imposed on employers and employees and on various compensation bases. They are collected and paid to the taxing jurisdiction by the employers. Most jurisdictions imposing payroll taxes require reporting quarterly and annually in most cases, and electronic reporting is generally required for all but small employers. Because payroll taxes are imposed only on wages and not on income from investments, taxes on labor income are much heavier than taxes on income from capital.
INCOME TAX WITHHOLDING
Federal, state, and local withholding taxes are required in those jurisdictions imposing an income tax. Employers having contact with the jurisdiction must withhold the tax from wages paid to their employees in those jurisdictions. Computation of the amount of tax to withhold is performed by the employer based on representations by the employee regarding his/her tax status on IRS Form W-4 . Amounts of income tax so withheld must be paid to the taxing jurisdiction, and are available as refundable tax credits to the employees. Income taxes withheld from payroll are not final taxes, merely prepayments. Employees must still file income tax returns and self assess tax, claiming amounts withheld as payments.
SOCIAL SECURITY AND MEDICARE TAXES
Main article: Federal Insurance Contributions Act tax
Federal social insurance taxes are imposed equally on employers and employees, consisting of a tax of 6.2% of wages up to an annual wage maximum ($118,500 in 2015 ) for Social Security plus a tax of 1.45% of total wages for Medicare. For 2011, the employee's contribution was reduced to 4.2%, while the employer's portion remained at 6.2%. To the extent an employee's portion of the 6.2% tax exceeds the maximum by reason of multiple employers (each of whom will collect up to the annual wage maximum), the employee is entitled to a refundable tax credit upon filing an income tax return for the year.
Main article: Federal Unemployment
Employers are subject to unemployment taxes by the federal and all state governments. The tax is a percentage of taxable wages with a cap. The tax rate and cap vary by jurisdiction and by employer's industry and experience rating. For 2009, the typical maximum tax per employee was under $1,000. Some states also impose unemployment, disability insurance, or similar taxes on employees.
REPORTING AND PAYMENT
Employers must report payroll taxes to the appropriate taxing jurisdiction in the manner each jurisdiction provides. Quarterly reporting of aggregate income tax withholding and Social Security taxes is required in most jurisdictions. Employers must file reports of aggregate unemployment tax quarterly and annually with each applicable state, and annually at the federal level.
Each employer is required to provide each employee an annual report on IRS Form W-2 of wages paid and federal, state and local taxes withheld, with a copy sent to the IRS and the taxation authority of the state. These are due by January 31 and February 28 (March 31 if filed electronically), respectively, following the calendar year in which wages are paid. The Form W-2 constitutes proof of payment of tax for the employee.
Employers are required to pay payroll taxes to the taxing jurisdiction under varying rules, in many cases within 1 banking day. Payment of federal and many state payroll taxes is required to be made by electronic funds transfer if certain dollar thresholds are met, or by deposit with a bank for the benefit of the taxing jurisdiction.
Failure to timely and properly pay federal payroll taxes results in an automatic penalty of 2% to 10%. Similar state and local penalties apply. Failure to properly file monthly or quarterly returns may result in additional penalties. Failure to file Forms W-2 results in an automatic penalty of up to $50 per form not timely filed. State and local penalties vary by jurisdiction.
A particularly severe penalty applies where federal income tax withholding and Social Security taxes are not paid to the IRS. The penalty of up to 100% of the amount not paid can be assessed against the employer entity as well as any person (such as a corporate officer) having control or custody of the funds from which payment should have been made.
SALES AND EXCISE TAXES
SALES AND USE TAX
Main article: Sales taxes in the United States The average effective sales tax for different income groups of the combined 50 States (2007).
There is no federal sales or use tax in the United States. All but
five states impose sales and use taxes on retail sale, lease and
rental of many goods, as well as some services. Many cities, counties,
transit authorities and special purpose districts impose an additional
local sales or use tax. Sales and use tax is calculated as the
purchase price times the appropriate tax rate.
Unlike value added tax , sales tax is imposed only once, at the retail level, on any particular goods. Nearly all jurisdictions provide numerous categories of goods and services that are exempt from sales tax, or taxed at a reduced rate. Purchase of goods for further manufacture or for resale is uniformly exempt from sales tax. Most jurisdictions exempt food sold in grocery stores, prescription medications, and many agricultural supplies. Generally cash discounts, including coupons, are not included in the price used in computing tax.
Sales taxes, including those imposed by local governments, are generally administered at the state level. States imposing sales tax require retail sellers to register with the state, collect tax from customers, file returns, and remit the tax to the state. Procedural rules vary widely. Sellers generally must collect tax from in-state purchasers unless the purchaser provides an exemption certificate. Most states allow or require electronic remittance of tax to the state. States are prohibited from requiring out of state sellers to collect tax unless the seller has some minimal connection with the state.
Main article: Excise tax in the United States
EXCISE TAXES may be imposed on the sales price of goods or on a per unit or other basis. Excise tax may be required to be paid by the manufacturer at wholesale sale, or may be collected from the customer at retail sale. Excise taxes are imposed at the federal and state levels on a variety of goods, including alcohol, tobacco, tires, gasoline, diesel fuel, coal, firearms, telephone service, air transportation, unregistered bonds, and many other goods and services. Some jurisdictions require that tax stamps be affixed to goods to demonstrate payment of the tax.
Main article: Property tax in the United States
Most jurisdictions below the state level in the
Property tax is based on fair market value of the subject property. The amount of tax is determined annually based on the market value of each property on a particular date, and most jurisdictions require redeterminations of value periodically. The tax is computed as the determined market value times an assessment ratio times the tax rate. Assessment ratios and tax rates vary widely among jurisdictions, and may vary by type of property within a jurisdiction. Where a property has recently been sold between unrelated sellers, such sale establishes fair market value. In other (i.e., most) cases, the value must be estimated. Common estimation techniques include comparable sales, depreciated cost, and an income approach. Property owners may also declare a value, which is subject to change by the tax assessor.
TYPES OF PROPERTY TAXED
Property taxes are most commonly applied to real estate and business property. Real property generally includes all interests considered under that state's law to be ownership interests in land, buildings, and improvements. Ownership interests include ownership of title as well as certain other rights to property. Automobile and boat registration fees are a subset of this tax. Usually, other nonbusiness goods are not subject to property tax.
ASSESSMENT AND COLLECTION
The assessment process varies by state, and sometimes within a state.
Each taxing jurisdiction determines values of property within the
jurisdiction and then determines the amount of tax to assess based on
the value of the property.
Once value is determined, the assessor typically notifies the last known property owner of the value determination. After values are settled, property tax bills or notices are sent to property owners. Payment times and terms vary widely. If a property owner fails to pay the tax, the taxing jurisdiction has various remedies for collection, in many cases including seizure and sale of the property. Property taxes constitute a lien on the property to which transfers are also subject. Mortgage companies often collect taxes from property owners and remit them on behalf of the owner.
IMPORT OF GOODS
Total tax revenue as share of
Goods may be imported to the
Rates of tax on transaction values vary by country of origin . Goods
must be individually labeled to indicate country of origin, with
exceptions for specific types of goods. Goods are considered to
originate in the country with the highest rate of duties for the
particular goods unless the goods meet certain minimum content
requirements. Extensive modifications to normal duties and
classifications apply to goods originating in Canada or
All goods that are not exempt are subject to duty computed according to the Harmonized Tariff Schedule published by CBP and the U.S. International Trade Commission. This lengthy schedule provides rates of duty for each class of goods. Most goods are classified based on the nature of the goods, though some classifications are based on use.
Where goods subject to different rates of duty are commingled, the entire shipment may be taxed at the highest applicable duty rate.
Imported goods are generally accompanied by a bill of lading or air waybill describing the goods. For purposes of customs duty assessment, they must also be accompanied by an invoice documenting the transaction value. The goods on the bill of lading and invoice are classified and duty is computed by the importer or CBP. The amount of this duty is payable immediately, and must be paid before the goods can be imported. Most assessments of goods are now done by the importer and documentation filed with CBP electronically.
After duties have been paid, CBP approves the goods for import. They can then be removed from the port of entry, bonded warehouse, or Free-Trade Zone.
After duty has been paid on particular goods, the importer can seek a refund of duties if the goods are exported without substantial modification. The process of claiming a refund is known as duty drawback.
Certain civil penalties apply for failures to follow CBP rules and pay duty. Goods of persons subject to such penalties may be seized and sold by CBP. In addition, criminal penalties may apply for certain offenses. Criminal penalties may be as high as twice the value of the goods plus twenty years in jail.
Foreign-Trade Zones are secure areas physically in the United States but legally outside the customs territory of the United States. Such zones are generally near ports of entry. They may be within the warehouse of an importer. Such zones are limited in scope and operation based on approval of the Foreign-Trade Zones Board. Goods in a Foreign-Trade Zone are not considered imported to the United States until they leave the Zone. Foreign goods may be used to manufacture other goods within the zone for export without payment of customs duties.
ESTATE AND GIFT TAXES
Estate and gift taxes in the
The federal gift tax is applicable to the donor, not the recipient, and is computed based on cumulative taxable gifts, and is reduced by prior gift taxes paid. The federal estate tax is computed on the sum of taxable estate and taxable gifts, and is reduced by prior gift taxes paid. These taxes are computed as the taxable amount times a graduated tax rate (up to 35% in 2011). The estate and gift taxes are also reduced by a "unified credit" equivalent to an exclusion ($5 million in 2011). Rates and exclusions have varied, and the benefits of lower rates and the credit have been phased out during some years.
Taxable gifts are certain gifts of U.S. property by nonresident aliens, most gifts of any property by citizens or residents, in excess of an annual exclusion ($13,000 for gifts made in 2011) per donor per donee. Taxable estates are certain U.S. property of non-resident alien decedents, and most property of citizens or residents. For aliens, residence for estate tax purposes is primarily based on domicile, but U.S. citizens are taxed regardless of their country of residence. U.S. real estate and most tangible property in the U.S. are subject to estate and gift tax whether the decedent or donor is resident or nonresident, citizen or alien.
The taxable amount of a gift is the fair market value of the property in excess of consideration received at the date of gift. The taxable amount of an estate is the gross fair market value of all rights considered property at the date of death (or an alternative valuation date) ("gross estate"), less liabilities of the decedent, costs of administration (including funeral expenses) and certain other deductions. State estate taxes are deductible, with limitations, in computing the federal taxable estate. Bequests to charities reduce the taxable estate.
Gift tax applies to all irrevocable transfers of interests in tangible or intangible property. Estate tax applies to all property owned in whole or in part by a citizen or resident at the time of his or her death, to the extent of the interest in the property. Generally, all types of property are subject to estate tax. Whether a decedent has sufficient interest in property for the property to be subject to gift or estate tax is determined under applicable state property laws. Certain interests in property that lapse at death (such as life insurance) are included in the taxable estate.
Taxable values of estates and gifts are the fair market value. For
some assets, such as widely traded stocks and bonds, the value may be
determined by market listings. The value of other property may be
determined by appraisals, which are subject to potential contest by
the taxing authority.
Life insurance proceeds are included in the gross estate. The value of a right of a beneficiary of an estate to receive an annuity is included in the gross estate. Certain transfers during lifetime may be included in the gross estate. Certain powers of a decedent to control the disposition of property by another are included in the gross estate.
The taxable estate of a married decedent is reduced by a deduction for all property passing to the decedent's spouse. Certain terminable interests are included. Other conditions may apply.
Donors of gifts in excess of the annual exclusion must file gift tax
returns on IRS Form 709 and pay the tax. Executors of estates with a
gross value in excess of the unified credit must file an estate tax
return on IRS Form 706 and pay the tax from the estate. Returns are
required if the gifts or gross estate exceed the exclusions. Each
state has its own forms and filing requirements.
LICENSES AND OCCUPATIONAL TAXES
Many jurisdictions within the
All 50 states impose vehicle license fee. Generally, the fees are based on type and size of vehicle and are imposed annually or biannually. All states and the District of Columbia also impose a fee for a driver's license, which generally must be renewed with payment of fee every few years.
Fees are often imposed by governments for use of certain facilities
or services. Such fees are generally imposed at the time of use.
Multi-use permits may be available. For example, fees are imposed for
use of national or state parks, for requesting and obtaining certain
rulings from the U.S.
Internal Revenue Service
The total tax revenue as a percentage of
Taxes in the
Organization of state and local tax administrations varies widely. Every state maintains a tax administration. A few states administer some local taxes in whole or part. Most localities also maintain a tax administration or share one with neighboring localities.
Internal Revenue Service
Internal Revenue Service
Internal Revenue Service
* Processing federal tax returns (except TTB returns), including those for Social Security and other federal payroll taxes * Providing assistance to taxpayers in completing tax returns * Collecting all taxes due related to such returns * Enforcement of tax laws through examination of returns and assessment of penalties * Providing an appeals mechanism for federal tax disputes * Referring matters to the Justice Department for prosecution * Publishing information about U.S. federal taxes, including forms, publications, and other materials * Providing written guidance in the form of rulings binding on the IRS for the public and for particular taxpayers
The IRS maintains several Service Centers at which tax returns are processed. Taxpayers generally file most types of tax returns by mail with these Service Centers, or file electronically. The IRS also maintains a National Office in Washington, DC, and numerous local offices providing taxpayer services and administering tax examinations.
Taxpayers have certain rights in an audit. Upon conclusion of the audit, the IRS may accept the tax return as filed or propose adjustments to the return. The IRS may also assess penalties and interest. Generally, adjustments must be proposed within three years of the due date of the tax return. Certain circumstances extend this time limit, including substantial understatement of income and fraud. The taxpayer and the IRS may agree to allow the IRS additional time to conclude an audit. If the IRS proposes adjustments, the taxpayer may agree to the adjustment, appeal within the IRS, or seek judicial determination of the tax.
Published And Private Rulings
In addition to enforcing tax laws, the IRS provides formal and informal guidance to taxpayers. While often referred to as IRS Regulations, the regulations under the Internal Revenue Code are issued by the Department of Treasury. IRS guidance consists of:
* Revenue Rulings , Revenue Procedures, and various IRS pronouncements applicable to all taxpayers and published in the Internal Revenue Bulletin , which are binding on the IRS, * Private letter rulings on specific issues, applicable only to the taxpayer who applied for the ruling, * IRS Publications providing informal instruction to the public on tax matters, * IRS forms and instructions, * A comprehensive web site, and * Informal (nonbinding) advice by telephone.
Alcohol And Tobacco
Main article: Alcohol and Tobacco
The Alcohol and Tobacco
* Revenue Center: processes tax returns and issues permits, and
* Risk Management: internally develops guidelines and monitors
Criminal enforcement related to TTB is done by the Bureau of Alcohol, Tobacco, Firearms, and Explosives , a division of the Justice Department .
Main article: U.S.
Every state in the
State tax returns are filed separately with those tax administrations, not with the federal tax administrations. Each state has its own procedural rules, which vary widely.
Most localities within the
United States Constitution
Congress has enacted numerous laws dealing with taxes since adoption
of the Constitution. Those laws are now codified as Title 19, Customs
Duties, Title 26, Internal Revenue Code, and various other provisions.
These laws specifically authorize the
State constitutions uniformly grant the state government the right to levy and collect taxes. Limitations under state constitutions vary widely.
Various individuals and groups have questioned the legitimacy of
Main article: Progressivity in
Commentators Benjamin Page, Larry Bartels and Jason Seawright contend
that Federal tax policy in relation to regulation and reform in the
Each major type of tax in the
Main article: Tax evasion in the United States
Internal Revenue Service
Total government spending on all levels (United States) Main article: Taxation history of the United States
Before 1776, the American Colonies were subject to taxation by the United Kingdom, and also imposed local taxes. Property taxes were imposed in the Colonies as early as 1634. In 1673, the English Parliament imposed a tax on exports from the American Colonies, and with it created the first tax administration in what would become the United States. Other tariffs and taxes were imposed by Parliament. Most of the colonies and many localities adopted property taxes.
Under Article VIII of the
Articles of Confederation
By 1796, state and local governments in fourteen of the 15 states taxed land. Delaware taxed the income from property. The War of 1812 required a federal sales tax on specific luxury items due to its costs. However, internal taxes were dropped in 1817 in favor of import tariffs that went to the federal government. By the American Civil War , the principle of taxation of property at a uniform rate had developed, and many of the states relied on property taxes as a major source of revenue. However, the increasing importance of intangible property, such as corporate stock, caused the states to shift to other forms of taxation in the 1900s.
Income taxes in the form of "faculty" taxes were imposed by the colonies. These combined income and property tax characteristics, and the income element persisted after 1776 in a few states. Several states adopted income taxes in 1837. Wisconsin adopted a corporate and individual income tax in 1911, and was the first to administer the tax with a state tax administration.
The first federal income tax was adopted as part of the Revenue Act
of 1861 . The tax lapsed after the American Civil War. Subsequently
enacted income taxes were held to be unconstitutional by the Supreme
Court in Pollock v. Farmers\' Loan "> U.S. federal government tax
receipts as a percentage of
The federal income tax enacted in 1913 included corporate and
individual income taxes. It defined income using language from prior
laws, incorporated in the Sixteenth Amendment , as "all income from
whatever source derived". The tax allowed deductions for business
expenses, but few non-business deductions. In 1918 the income tax law
was expanded to include a foreign tax credit and more comprehensive
definitions of income and deduction items. Various aspects of the
present system of definitions were expanded through 1926, when U.S.
law was organized as the
Federal taxes were expanded greatly during
World War I
In 1986, Congress adopted, with little modification, a major
expansion of the income tax portion of the IRS Code proposed in 1985
by the U.S. Treasury Department under President Reagan. The
Federal income tax rates have been modified frequently.
The first individual income tax return Form 1040 under the 1913 law was four pages long. In 1915, some Congressmen complained about the complexity of the form. In 1921, Congress considered but did not enact replacement of the income tax with a national sales tax.
By the 1920s, many states had adopted income taxes on individuals and corporations. Many of the state taxes were simply based on the federal definitions. The states generally taxed residents on all of their income, including income earned in other states, as well as income of nonresidents earned in the state. This led to a long line of Supreme Court cases limiting the ability of states to tax income of nonresidents.
The states had also come to rely heavily on retail sales taxes. However, as of the beginning of World War II, only two cities (New York and New Orleans) had local sales taxes.
The Federal Estate
All governments within the
* ^ Porter, Eduardo (August 14, 2012). "America\'s Aversion to
New York Times
* ^ "
* IRS Publication 17, Your Federal Income Tax
LAW et al., South-Western Federal Taxation, 2013 edition ISBN
* Pratt, James W.; Kulsrud, William N.; et al, Federal Taxation",
2013 edition ISBN 978-1-1334-9623-6 (cited above as Pratt).
* Whittenberg, Gerald; Altus-Buller, Martha; and Gill, Stephen,
* Minarik, Joseph J. (2008). "Taxation". In David R. Henderson
Concise Encyclopedia of Economics (2nd ed.). Library of
Economics and Liberty . ISBN 978-0865976658 .
POPULAR PUBLICATIONS (annual):
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* Tariffs applied by the