It is tax season in the United States!  In fact April 15th is “Tax Day” every year in the United States.  Since April 15th falls on a Sunday this year, US Income taxes are due on April 17th this year, but April 15th is the day that people always think of as “Tax Day” in the United States.

People in the United States pay many different kinds of taxes throughout the year, but generally people talk (and complain) the most about “Income Taxes”.  It is now that everyone has to pay both the federal and state governments taxes based on what they have earned at work over the last year.  Other types of taxes that people in the United States pay throughout the year include: property taxes (based on property that one owns – like a house), sales taxes (based on items bought in stores – like clothes), estate taxes (based on inheritance*), and import taxes (based on items brought in to the United States that were bought in other countries).

Both federal and state income taxes are generally imposed** in the same way in the United States.  There are some states though (for example New Hampshire) that don’t impose any state income taxes.  For the purpose of this post I will just focus on federal income taxes, but keep in mind that most people are paying both federal and state income taxes at about the same rates.

The income that is taxed by the United States government is determined by a number of tax rules, for example most business expenses (i.e. money spent to run a business) reduce taxable income.  Individual people are also allowed to reduce their taxable income with personal allowances*** by deducting money they have paid in home mortgage interest, charitable contributions, medical expenses, etc.  The federal tax rates on overall income varies from 15% – 35% of all of one’s income (after a person has made allowed deductions).

So, for example, if you live in the United States and you make $40,000 a year; this is your income and this is what you will be taxed on every April 15th.  Before you pay income taxes on this amount though, you may have a number of deductions or allowances you can use to reduce this amount, for example: charitable continuations, or mortgage interest payments, or college tuition payments.  So, for example, after all your deductions and allowances you may reduce your taxable income to $34,000.  Then you will be taxed by the government at a certain percentage (somewhere between 15-35%, usually the more you make the higher the rate you are taxed at).  If you are taxed at 15% on the $34,000 you have of taxable income you will have to pay the United States government $5,100 on April 15th.  That is a lot of money for most people to have to pay all at once!  Luckily most people don’t have to pay all of this money at one time.  Most employers in the United States estimate how much their employees will have to pay in income taxes each year and take a percentage of this money out of each paycheck a person receives throughout the year.  Then on April 15th, if you and your employer have estimated your income tax correctly throughout the year, you may not have to pay anything at all because you are all paid up, or you might just have to pay a little bit, or (if you are lucky) you might get a refund from the government because you have over paid your income tax amount throughout the year.  Everyone has to file a federal tax return form if they worked during the previous year, regardless of whether a person has to pay additional taxes, if they will get a refund, or if the person doesn’t owe taxes nor will they receive a refund with the federal government.  It is by completing this income tax form that people find out if they have paid the right amount, too little, or too much to the government and if they now own more money or will be getting money back.  It is always nice to get money back!  That is a brief overview of how the income tax system works in the United States, if it seems complicated to you, you are not alone, it seems complicated to many of us Americans too.

(Not so) Happy Tax Day everyone!

Remember as always you can find lots or resources to help you learn English at transparent.com.  It doesn’t have to be taxing to learn a new language with our help 🙂

* inheritance = receiving money or other material goods from someone who has died
** imposed = forced on to or put in place
*** allowances = amount of something that is permitted to be apart, specifically within a set of regulations