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Video: What are Income Taxes?

Updated for Tax Year 2015


OVERVIEW

Income taxes are a percentage of money that you pay to the government based on every dollar you make at your job. Learn about income taxes with help from TurboTax in this video on tax tips.


Hello, I'm Sara from TurboTax with some information about income taxes. Let's face it, no one loves paying income taxes but without it, the government could not operate or provide us with the services we need. In the U.S., income taxes are a significant source of revenue for governments. The U.S. government for example, collected almost 1.5 trillion dollars of income tax in 2008. This accounted for 57% of its revenue that year and most of it came from individual tax payers like you.

Our system in the U.S. is a voluntary one. This doesn't mean it's option, just that we calculate the tax for ourselves rather than paying a bill we receive from federal and state governments.

However, there are other types of taxes that are not voluntary. The sales taxes you pay to your state government for purchases you make are a fixed percentage. You don't have the option of paying later or claiming deductions to reduce it.

You may be surprised to know that we didn't always have an income tax. It wasn't until the government needed money for the Civil War in the 1860s that Americans had to start paying taxes. And even for some time after that, courts claimed it was unconstitutional. However, since that time the Constitution has been changed to make our taxation system legal. What this means is that, in a nutshell, income taxes are here to stay.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


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