How You Can Save Money on Your Income Tax by Understanding the Difference Between Indirect and Direct Taxes

How You Can Save Money on Your Income Tax by Understanding the Difference Between Indirect and Direct Taxes

A tax is an obligatory annual financial burden or any sort of tax levied on a person by a government agency in order to finance various public services and government spending. A person may be charged either with personal tax or income tax. The former is often times referred to as “income tax” while the latter is commonly called as “franchise tax.” Evasion of or refusal to pay taxes, and/or resistance to or disobedience to tax, is highly punishable by law.

Individual income tax is often times equated or thought of as the more “real” form of taxation, because it is based directly upon income and not on tangible assets or property. For this reason, it imposes a slightly higher percentage on the wealthy than on the poor. This higher percentage is due in large part to estate taxation, which is levied on the higher portion of a person’s net worth that is subject to taxation. The estate tax is also levied on items that are transferred between people, as well as on any item that is bought or sold within a specific time period.

Corporate income tax is very different than the individual income tax in many ways. First, corporate tax rates are much lower than individual rates. In addition, corporate tax is based solely on the value of a corporation’s stock issued as a company stock and not on the earnings of the corporation as a whole. Businesses are sometimes able to deduct interest paid on accounts receivable and on secured loans from their books of accounts. Because corporations are required to distribute their income tax based on these amounts, however, they are also very sensitive to changes in these percentages.

Certain situations will cause taxpayers to be subject to both individual and corporate tax liability. Married couples who have separate tax liabilities will be subject to a single tax liability on their joint return. Businessmen may also earn dividends which may be taxed differently from their normal earned income. The IRS has several different methods for calculating a businessman’s tax liability.

The main differences between income tax and corporate tax are the way the checks are issued and what is included and excluded in the calculations. Many people mistakenly think that the only thing included in the calculation of their tax liability is their federal tax obligation. That is not true. Businessmen also have to calculate their state and local taxes, property taxes, sales taxes and even inheritance taxes. Because these taxes vary from locale to locale, so do the taxpayers’ eligibility for deductions.

There are several types of regressions available for calculating tax liability. regressions that include adjustments for each category of tax, including: sales, use, and income taxes. regressions also include allocations for capital gains and dividends and several other allocations that are designed to provide an accurate assessment of the tax liability of individuals. regressions that do not include adjustments for these categories are called base rates and these estimates are used primarily for statistical analyses. regressions that include adjustments for all of the categories that would apply to a given individual are called full models.