A compulsory transfer of resources to a government, levied on individuals and organizations by legal means (taxation) or non-legal means (subsidies, fines and penalties). Governments can obtain resources through taxes and fees as well as printing bills and minting coins, borrowing, confiscating criminal proceeds, imposing penalties and receiving voluntary gifts. Taxes are considered essential for a nation to function. Taxes can be used to fund the infrastructure of a country, schools, universities, hospitals, national defense and law enforcement, social safety net, and more.
The amount of money you pay in taxes depends on where you live, what you earn, what you own, what you buy, credits and deductions, and more. You calculate your taxes by subtracting certain adjustments from your gross income, which is the number of items reported on your federal tax return. The IRS has five filing statuses: single, married filing jointly, head of household, qualifying widow(er) with dependent child, and others.
There are many different types of taxes, including sales taxes, property taxes, income taxes, excise taxes, and more. Some are based on percentages of total sales value or on physical quantities (“ad valorem”-sales taxes, for example), while others are a flat fee on specific goods or services, such as a gasoline tax. In addition, some are recurrent while others are one-time charges. Some are imposed at the federal level, while others are levied at the state or local levels. Governments use taxes to fund a wide variety of public services, and the side-effects of these taxes are the subject of much economic theory.
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