Federal Income Tax
The Federal Income Tax is a progressive tax imposed by the U.S. federal government on individuals and entities, determined by their income. Collected and managed by the Internal Revenue Service (IRS), this tax mandates individuals and businesses to annually report their income, deductions, and credits through tax returns. The tax rates increase with higher income levels. The revenues generated play a vital role in funding government services and programs.
While taxable income amounts will vary due to filing status, all of the following earnings are subject to federal income tax:
- Wages and salaries (including those from self-employment)
- Bonuses and cash gifts from employers
- Tips and commissions
- Unemployment benefits
- Cancelled debts
- Business income
- Gambling income
- Capital gains
