An Introduction to Income Taxes

Commonly income taxes mean two things to the average taxpayer. They are there to improve the many services provided by our government and cause us to feel frustrated about the many things our paychecks are reduced by.

Large companies all the way down to local businesses that drive our economy hand out paychecks to employees every week. After a long week at work, many employees look at the paycheck and are disappointed with their net pay. A consultant that makes 50 dollars an hour possibly expects to find a direct deposit for 2000 dollars at the end of the week. Nevertheless, when that paycheck graces your bank account, that number is reduced for the fact that we have a wide variety of taxes to pay to keep our economy functioning.

Tax procedure is a very long and complicated endeavor - being paid by nearly everyone that earns money. Furthermore you need to know that tax season is a year round venture. Income taxes are not collected exclusively during tax season. The best way to give an example of this would be to follow the tax process of a single person. When an employee is hired to start at a company and salary has been agreed upon between employer and employee, the new hire is required to fill out a W4 form. This form includes withholding allowances and expenses are outlined, such as dependant status. Using this form employers know how much should be withheld from each paycheck in order to offset tax debt.

During every fiscal week companies collect the withheld money and send it to the Federal Reserve, the government uses this as a savings account and accrues interest on the monies sent. Instead of receiving tax's in one lump sum at the end of the year, the government insures that the economy runs smoothly. It is a common misconception that we only pay taxes on April 15^th, the end of tax season.

Employers are responsible for sending the employee a W2 form after their worker fills out a W4 form. A W4 outlines the total amount of money an employee has made during the year and includes withholding information. During the year, individual paychecks outline this information but a W2 is the official document we send in when we file our taxes. An employee is responsible for filing taxes after they receive a W2 and before the tax deadline of April 15^th. Tax refunds are investigated, retained and processed, after which are sent back to employees. In America's economy, taxes are a necessity. Our government funds a host of services that we need such as health care, public libraries and policing.

Bear in mind that income taxes in European countries are far greater than those in the United States, so stay optimistic. Income taxes are a small price to pay for the liberties we as a country enjoy.