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9.2 The Federal Tax System

9.2 The Federal Tax System. Individual Income Taxes. 16 th Amendment, 1913 50% of federal gov’t revenue comes from individual income taxes Most cases : collection through payroll withholding system>sent directly to the gov’t. The IRS. Internal Revenue Service Branch of the U.S. Treasury

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9.2 The Federal Tax System

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  1. 9.2 The Federal Tax System

  2. Individual Income Taxes • 16th Amendment, 1913 • 50% of federal gov’t revenue comes from individual income taxes • Most cases : collection through payroll withholding system>sent directly to the gov’t

  3. The IRS • Internal Revenue Service • Branch of the U.S. Treasury • Employees file a tax return with IRS by April 15 of each year

  4. The Progressive Income Tax • Our income tax system in progressive and marginal • Individuals pay a flat tax on income to a certain level, then a progressive tax on all income after that amount.

  5. FICA Taxes • Second most important federal tax is FICA (Federal Insurance Contributions Act) • Employees and Employers contribute to FICA • FICA covers Social Security and Medicare

  6. Corporate Income Taxes • Third largest category • Corporations pay taxes on their profits • Also progressive and marginal

  7. Other Federal Taxes • Excise taxes : tax on manufacture or sale of selected items, such as gas or liquor • Estate tax : exempt up to $3.5 million this year, then 45% tax on the remaining amt. • Gift Tax : as of 2009, gifts up to $13,000 per person are exempt

  8. continued • Customs duty : charged on goods brought from other countries • User fees : entrance fees to parks,etc.

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