This time instead of discussing debt, we will take a look at income tax, January and February are the two months when the majorly of Americans’ attention turns to another aspect of finance; namely taxes.
The question is, what are taxes?
Definition of tax: a fee charged or levied against a process, product, and license.
There probably is not a day that goes by that you do not pay tax on something. A couple examples of these taxes are: cigarettes, tax on food when you eat in a restaurant, gasoline tax, taxes on movie tickets and sporting tickets. These give you how vast the field of taxation is in this country.
The taxes on ones paycheck are the ones that effect the individual the greatest this time of year. In most cases, the items mentioned in the chapter on income are taxed.
How does one prepare for annual income tax? If you are starting to gather data for tax year 2015, you start collecting on January 1, 2015. It is a wise idea to keep every receipt you receive on every purchase you make or every donation made. If a donation is greater than $500 you are usually required to have a letter of thanks from the party or parties that received the donation. The letter will state that you did not receive any service or reward for the donation. Usually if you buy a chance on a car or money or anything of value, the gift is not considered a donation. Dues you pay to certain non-profit organizations are not considered deductible, but money donated to one or more of their Charites is.
At the present time most states and many cities also have income tax. You can check on your state status by going to your State Department of taxation and for the city in question to the city’s Department of taxation.