The first income tax in the United States was implemented in 1861 to help the federal government cover the costs of the Civil War, according to the Library of Congress. This tax was repealed 10 years later, and after several variations was eventually replaced by the 16th Amendment to the U.S. Constitution, which allowed the government to collect an income tax as a source of federal revenue.Know More
The 16th Amendment was ratified in 1913. Since then, federal income taxes have come to be seen as an indispensable part of what Oliver Wendell Holmes described as the price paid "for a civilized society," according to the U.S. Department of the Treasury. The framers of the Constitution enumerated the government's obligation to provide for the common defense and promote the general welfare. Taxes on income are the method by which the government collects the revenue necessary to execute these functions.
Another useful function of public taxation, according to the Treasury, is in educating the public about the real cost of the government's services. Knowing how much a certain policy will cost before it's implemented encourages lively debate and the rational cost-benefit arguments that are central to policy decisions undertaken by the citizens of a republic. A policy of general taxation thus encourages a broad public understanding of what the government does and how it operates, information vital to voters.Learn more about Income Tax
The purpose of the income statement is to show the profitability of a company during a specific period, says accountant Harold Averkamp. Investors use this statement, along with other financial statements, to determine if a business is a good investment.Full Answer >
In most cases, monetary damages awarded by a court of law in the United States are treated as taxable income, with the exception of awards for physical injury or physical sickness. According to Nolo, these exceptions are explained in code 26 U.S.C. § 104(a). Other monetary awards arising from law settlements are taxed at ordinary rates.Full Answer >
Regardless of if a person claims 1 or 0 on their W-4 tax form, they will still pay the same amount in taxes at the end of the year, but if the person claims 0 then he or she will have more money taken out of each paycheck and possibly have a larger tax refund, and if they claim 1 then they will have less money taken out of each paycheck but a lower or possibly no tax refund. It is most often up to personal preference whether a person wants more taken out of each paycheck and a return at the end of the year, or more to live on each month but a smaller or potentially zero refund at the end of the year.Full Answer >
According to H&R Block, pension income is not considered earned income because it is not money a person receives for recent labor they perform; however, the person will still have to pay taxes on pension income and may be eligible for the earned income credit if they have additional qualifying earned income. A person usually receives a pension after retiring from a company, and it may be paid at all once or on an installment basis.Full Answer >