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Readings – Level 3

Income Taxes

Readings


 
In 1913 all the states of the union gave congress the authority to collect federal income tax, by ratifying the 16th amendment to the United States constitution. Payroll tax withholding was established during World War II, as a means to secure a steady source of funding towards the war effort. Each year, employers are required to send copies of W2 income earning statements to their employees and to the government by January 31st. These W2 statements list an employee’s income for the preceding year, and all US residents earning more than $400 dollars must file an annual income tax return. The deadline to file income tax returns generally occurs on April 15th except when April 15th falls on a Sunday or legal holiday. In those cases, the deadline may be extended to April 16th or 17th, depending upon circumstances. If you are an employee, the W2 is a form of income documentation that you need in order to complete you tax return. The W2 form itemizes your yearly earnings, as well as the total amount of income taxes you paid during the year to the federal, state, and local governments, and any other government agencies.

The Internal Revenue Service or IRS is the government agency responsible for tax collection. It is important to state your income accurately to the IRS, because the IRS will audit your tax returns if what you declared as income does not match the data provided to the IRS by your employer. You pay income taxes on any business activities that generate money for you even if you are retired or live abroad. The amount of money you pay in taxes is relative to the amount of money you make. Therefore, the more money you make the more taxes you pay.

Due to the complex nature of tax regulations and tax returns, many people prefer to hire an accountant or a tax preparation agency to complete their return. Working with a professional tax preparer helps ensure accuracy and can also expedite your refund check if you overpaid the federal government. In cases where not enough taxes were paid during the year and more money is due, you can work out a monthly installment plan if you do not have the money to pay the lump sum you owe to the government. If you decide to prepare and file your tax forms by yourself, to begin with, you will need your W2 statements and your taxpayer identification (TIN) or social security number. Some taxpayers still receive tax forms in the mail, which need to be fill out correctly and send back to the IRS. Nowadays however, there are software programs available, which enable people to prepare income tax returns and file electronically on home computers. This method is growing more and more in popularity, since as Americans say, “the only things in life that are certain are death and taxes.”

Vocabulary and Expressions

To file = to enter (a legal document) on public official record.
Tax returns = the tax form used to file income taxes to the IRS.
W2 form = the form your employer sends to you and the IRS at the end of the year to report your annual wages, taxes withheld, and other information.
Deadline = the time by which something must be finished or submitted.
Documentation = written records or supporting reference as to substantiate a claim.
To earn = to gain or get in return for one’s labor or service.
Federal income tax = tax on your personal income impose by the federal government in order to provide money for programs such us defense, foreign affairs, law enforcement and interest on the national debt.
Ratify = to confirm by expressing consent, approval, or formal sanction.
Amendment = an alteration of or addition to a motion, bill, constitution.
Payroll withholding = amount of money that your employer retains every pay period in order to pay your taxes to the federal government, state government, city, etc.
To secure = to get hold or possession of; procure; obtain.
Accurately = adverb, accurate + ly meaning strictly, correctly.
Tax collection = the act of collecting taxes.
To audit = to examine records or financial accounts to check their accuracy.
To declare = to make do statement of especial goods for duty or income for taxation.
Business activities = activities undertaken as part of a commercial enterprise.
To generate = to produce, to bring about.
Fairly = adverb, fair + ly meaning moderately.
Accountant = a person whose profession is inspecting and auditing personal or commercial accounts.
Tax preparation agency = agency that specializes in preparing taxes.
Accuracy = correctness, exactness.
Expedite = to speed up the progress of; to accomplish promptly.
Overpay = to pay in excess.
Lump sum = A single sum of money that serves as complete payment.
Monthly installments = amount of money paid every month towards a debt.
Taxpayers = people who pay taxes.

Conversation Activities

1. Do you pay taxes in your country?
2. How much is the percentage of your salary do you pay in taxes?
3. Why do you think single people pay more taxes than married people?
4. What is the name of the government agency that collects taxes in your country?
5. Does the government in your country give tax returns to people?
6. Does the government in your country give tax breaks to companies?