The taxation system followed in the USA is very unique and innovative. It is levied by states, local, and the federal government. Let’s start with the basics of US Taxation. Mainly there are two direct taxation laws followed in the USA, these are:
State Income Taxes
Respective State governments charge an income tax that is based on the calculations stated by the state taxation policies. This means that the tax charge would differ from state to state as each state has its own autonomous tax system.
Federal Income Tax
This income tax is imposed by the IRS or Internal Revenue Service based on the annual income of the payer. This is applied to any form of revenue the entity generates, including their capital gains or even salary.
Both of these tax laws apply to businesses, trusts, organizations, estates, and also individuals. These laws ensure that the taxes paid are based on business activities, transfer, property, transactions, import, and income. There are only a few exemptions for these. Various governmental bodies and levels have this immunity from paying taxes.
Tax Rates
The tax rates differ in the US as there are so many states. New Jersey, Oregon, California, Minnesota, and Hawaii are known to have the highest rates for state income tax. While 7 states have no state tax at all. 9 other states follow a flat tax rate system. This means that every citizen will pay the same percentage. However, the tax rates range from 0% to 13%; or more in a few cases. It will depend on where you live in the USA.
Due Dates
Every year, the income tax-paying or filing deadline remained fixed for all payers. It is 15th April, however, under the current pandemic situation the date was extended to 15th July. This extension has been applied to all corporations, individuals, and trusts. The taxpayers will have to clear their dues and returns by then.