Income taxes take many forms and thus the individuals are supposed to know the type of income tax that they are eligible to pay. It is advisable to know the total amount of tax that you are supposed to pay within a specified period of time so that you plan for the remaining amount of funds either from your monthly income or from the profits accrued from your business corporate. Many people who do not calculate well for their tax deductions come to get frustrated at the pay day when they find an amount that they were not expecting and their expenses actually outweighs their earnings.
Every country has set a certain policy on how to calculate and know the amount that you are supposed to pay as tax and thus one is not supposed to get frustrated at all since all the calculations and formulas to use are available at the taxing body of your country. In connection with this, different types of income tax exist where the calculations differ and it is the mandate of the tax payer to know how much to pay as tax for a certain period of time.
Personal Income Tax
We have the personal tax. This is also referred to as an individual income tax and is actually levied on the total income of an individual. For example if an individual of a certain country receives $5000 per month as his or her total income, a tax of say, 5% is levied on the total earning per month and this results to $250 which is the amount of tax that he or she is supposed to pay monthly and it is now referred to as the personal tax. Sometimes it is collected on Pay As You Earn (PAYE) basis and this is actually good since the taxpayer will not feel a lot of pitch in the payment of the tax. The tax systems of different countries often have some deductions obtainable that lessen the amount of personal tax to be paid by an individual hence caring for such an individual.
Corporate Income Tax
Corporate tax which refers to the direct tax that is levied on profits that companies make and actually includes principal gains of a company. We should note that income here is considered as gross revenue minus the expenses of the company. This constitutes of the net income that is liable for a corporate tax. It should also be noted that corporate expenses which are related to capital expenditure are typically deducted in full.
Payroll Income Taxes
Payroll income taxes refer to those taxes for the employees and the employers. The worker payroll taxes are the taxes that employers are supposed to withhold from the employees’ salaries. The employer is supposed to withhold some of the employee pay which will actually be used to pay the employee’s personal income obligation. If the employee finds that he or she has exceeded the required payment, he or she will have a tax refund or the payment is carried forward for future tax payments. Employers payroll taxes are normally paid from the employers own money and generally these payroll taxes do cover government community insurance programmes for example; unemployment health care, and social security.