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why do we pay taxes in america

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tax forms are available for free at post offices, banks, libraries, etc. You can also download them from the web site. Forms also have detailed instructions and worksheets with them. You can file the taxes yourself or you can get professional help. You can also file with software like Turbo Tax or you can eFile the taxes on the IRS web site. However, before you can eFile your taxes, you will require a PIN number that you can obtain from the IRS website by providing your date of birth, social security number, and information from your previous year's tax return. If you file online, make sure to print a hard copy of the return for your records and preserve it for at least 7 years. Tax returns essentially list your income and any allowed deductions or credits against that income, and it shows the tax liability at the end. If your tax return is simple, you can do it yourself. You may also be able to file Form 1040-EZ if it applies to you. There are also several tax preparations services such as H R Block or Jackson Hewitt that file simple tax returns for a small fee. However, if it is complicated, you should seek professional help, preferably from a CPA. You can also call the IRS customer service at (800) 829-1040 from 7 A. M. to 10 P. M. Eastern Time.


It is absolutely recommended that a CPA file your taxes if you own a business. Before filing the tax returns, check several times to make everything is accurate. Make sure to keep copies of everything you send. Send the tax returns by a trackable method such as certified mail with a return receipt. Please note that even if you filed the tax returns with the help of tax software, tax preparer, or even a CPA, you are solely liable for all information on your tax return. Therefore, it is very important to know as much as possible about taxes. If you owe money towards federal income taxes, you need to provide either your credit card information, pay online, or write a check payable to the United States Treasury. If you are entitled to a refund, you can either provide your bank information so the IRS can deposit money directly into your account, or you can have them send you a check. Direct deposit into your bank account generally takes around two weeks, while it may take one month or more to receive a physical check.


If applicable, you also will have to file state income and other local tax returns. You will receive several copies of Form W-2 and Form 1099. You will have to attach each form with each return you file. Tax day is a day away and this time of year there are always questions about who pays how much in taxes. A found that Бthe feeling that some wealthy people donБt pay their fair share,Б bothered 79 percent of respondents some or a lot. shows that these respondents can rest easy. When it comes to individual income taxation in the United States, the average tax rate paid increases as we move up the income scale (chart below). As a group, taxpayers who make over $1,000,000 pay an average tax rate of 27. 4 percent. At the bottom of the income scale, taxpayers who earn less than $10,000 pay an average tax rate of -7. 1 percent, which means they receive money back from the government, in the form of refundable tax credits. The next income group up has an even lower negative tax rate at 11 percent.


These results are as expected. The U. S. income tax system is progressive, with marginal tax rates increasing as incomes increase and a large number of tax credits (refundable and nonrefundable) that limit the tax burden for lower incomes. Many would argue, however, that people pay more federal taxes that just individual income taxes. They are correct. People also pay social insurance taxes (for Social Security, Medicare, Unemployment Insurance, etc. ), business taxes, and excise taxes. But even when we consider these taxes, the tax code is still progressive. The Joint Committee on taxation report finds that the average combined marginal income and social insurance tax increases substantially as income increases. The average combined marginal tax rate is 7. 7 percent for those who make under $10,000 and 44. 6 percent for those who make over $1,000,000. We see that this progressivity remains when we look at average tax rates that combine income and payroll taxes with business and excise taxes as well (chart below).


The average tax rate for taxpayers who earn over $1,000,000 is 33. 1 percent. For those who make between $10,000 and $20,000 the average total tax rate is 0. 4 percent. (The average tax rate for those in the lowest income tax bracket is 10. 6 percent, higher than each group between $10,000 and $40,000. This is likely because the amount of refundable tax credits is much smaller for the income group that makes under $10,000. ) Whether this level of progressivity is the correct amount requires a larger discussion, but itБs important to note that progressive taxes come with an economic cost. The shows that progressive taxes limit economic growth. In a report from 2012, the that moving away from progressive taxes would raise living standards. Our own economic model (TAG) finds that a cut in the top marginal income tax rate would and that refundable tax credits have little impact on economic growth. When we determine the type of tax system we want to have and who should pay how much, we should evaluate these types of trade-offs with the greatest amount of information possible.

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