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Understanding the basics of federal and state taxation is essential for citizens to manage their finances effectively. Tax laws can be complex, but knowing key information helps in compliance and planning.
Federal Taxation
Federal taxes are collected by the federal government to fund national programs and services. These include Social Security, Medicare, defense, and infrastructure. Citizens are required to file annual tax returns based on their income.
The main federal tax types are income tax, payroll tax, and corporate tax. Income tax rates vary depending on income levels and filing status. The Internal Revenue Service (IRS) oversees tax collection and enforcement.
State Taxation
State taxes are levied by individual states to fund local services such as education, transportation, and public safety. Not all states impose income tax, and rates vary widely among those that do.
In addition to income tax, states may collect sales tax, property tax, and other fees. Citizens should be aware of their state’s specific tax laws and filing requirements.
Key Tax Considerations
- Tax Filing Deadlines: Federal and state returns typically due by April 15.
- Tax Credits and Deductions: Reduce taxable income and liability.
- Record Keeping: Maintain documents for income, expenses, and deductions.
- Tax Assistance: Seek professional help or use official resources for guidance.