2. Paying Federal and State Taxes


One of the most important days of the year is April 15, which is the deadline for all the United States citizens to file income tax forms. Income tax is a tax placed on working individuals on the money they earned the previous year. Both the state and federal governments impose this tax, and in some cases, city and county also. For most individuals, the employer deducts your federal, and state taxes from each pay period. The amount they take from workers is based on a W-4 form that is filled out as part of the hiring process. Each company is required by law to hold income tax from their employees, with few exceptions. In order to gain legal employment in the U.S., a person must have a Social Security Number (SSN). This is the number individuals use to file their taxes each year.

The most common federal tax form used by individuals is the form 1040, followed by the 1040EZ. These federal tax forms are similar, but the form 1040 is more complex. The 1040EZ is a form that many new employees use especially if they do not earn much money. The rate that a person is taxed is partially based on the number of dependents that person has. For instance, if an individual has a wife and three children, the husband can claim five dependents (including himself). This person will be taxed at a lower rate than a person who has only one, or two dependents. When filling out the employer's W-4 form, individuals must be honest about the number of dependents they claim.

The Internal Revenue Service (IRS) is the agency that collects income taxes for the federal government, and in California, it is the State Tax Franchise Board. Tax forms are available online at www.irs.gov for federal taxes and at www.ftb.ca.gov for California.

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