Income Tax

What does Income Tax mean?

Income tax refers to a tax levied on an individual's income in the form of a state income tax or federal income tax.

Taxing authorities of each individual state are responsible for collecting income tax for that state. The Internal Revenue Service is responsible for collecting federal income tax. Although each state has the right to pass income tax laws that govern income tax in that state, many states opt to mirror federal income tax law at the state level.

Federal income tax and many state income tax returns are due on April 15 of each year. When April 15 falls on a holiday or a weekend, income tax returns are due on the first business day thereafter. Taxpayers may file for a six-month extension in the event they are not prepared to file their tax returns on April 15.

Federal income tax is levied using a progressive tax system, meaning individuals are taxed at a higher percentage as their taxable income increases. For the 2013 tax year, the marginal tax rates are 10, 15, 25, 28, 33, 35, and finally 39.6 percent for the highest income earners.

Income tax was first collected in the United States in 1862. The Internal Revenue Service receives approximately 230 million tax returns each year accounting for $2.4 trillion in taxes.

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Category: Tax