Federal Income Tax

Federal Income Tax is a tax imposed by the federal government on the income of individuals, Corporations, and other entities. This tax is a progressive tax, meaning that the rate increases as the taxable amount increases. The tax is calculated based on the income earned during the tax year, with various deductions and Credits available to reduce the overall tax Liability.

For individuals, federal income tax is typically withheld from wages and salaries, while businesses are required to file tax Returns and pay taxes based on their Net Income. The Internal Revenue Service (IRS) is the federal agency responsible for tax collection and enforcement.

Examples:

• An individual earning $50,000 annually might pay a lower percentage in taxes than someone earning $200,000, due to the progressive tax structure.
• A Corporation that generates a profit of $1 million may be subject to a corporate tax rate, which can differ from individual rates.

Cases:

• The case of United States v. Sullivan, where the Supreme Court ruled that failure to report all income, including illegal earnings, is subject to taxation.
• In Burnet v. Coronado Oil & Gas Co., the court clarified that tax Liability is based on Net Income after allowable deductions.