If you’ve never filed income taxes before or if you’ve lived in another country, the United States income tax system likely seems confusing and complex. Plus, the responsibility is on you—the individual taxpayer—to figure out your tax, unlike some countries where the government figures out your tax (Reid, 2017). Read on to learn the basics of the U.S. tax system and how to file and pay—or get a refund—on your taxes.
Overview
Any government that needs to raise revenue and has the legal authority to do so may tax. Tax jurisdictions reflect government authorities. In the United States, federal, state, and municipal governments impose taxes. Similarly, in many countries there are national, provincial or state, county, and municipal taxes.
Jurisdictions may overlap. For example, in the United States, federal, state, and local governments may tax income, which becomes complicated for those earning income in more than one state, or living in one state and working in another.
Governments tax income because it is a way to tax broadly based on the ability to pay. Most adults have an income from some source, even if it is a government distribution. Those with higher incomes should be able to pay more taxes, and in theory should be willing to do so, for they have been more successful in or have benefited more from the economy that the government protects.
Taxes are law. Federal tax law is written by the U.S. Congress and enforced by the Internal Revenue Service (IRS), which is a part of the U.S. Department of the Treasury. The IRS is responsible for the collection of taxes. To collect tax revenues, the IRS has to figure out how to inform people about meeting their income tax obligations while also collecting enough information to be able to check that those taxes are correct.
The tax code changes frequently. Some changes are annual adjustments to tax brackets or standard deductions while others are a result of tax-related laws passed by Congress. Taxpayers should expect some changes every year to their taxes.
Learn how tax dollars are spent in this video:
