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United States tax question

by Biggy Fat
5 replies
Hello World. I know that in the U.S. we're all required to pay taxes every year where the income exceeds $600. But one thing that puzzles me - what percentage of the money do they actually take, like 10%? 15%? Please inform me of this.
#question #states #tax #united
  • Profile picture of the author Dan C. Rinnert
    Originally Posted by Biggy Fat View Post

    Hello World. I know that in the U.S. we're all required to pay taxes every year where the income exceeds $600. But one thing that puzzles me - what percentage of the money do they actually take, like 10%? 15%? Please inform me of this.
    You have to pay taxes on your income whether it's $10 or more than $600. The $600 is the threshold for which a payer is required to report the payment to the IRS. You are still required to report that income even if it's $500. And woe will be you if you ever get audited and haven't been reporting income under $600.

    The exception would be if your total annual income is below the requirements to pay taxes.

    As for percentages, I've seen people recommend setting aside at least 30% for your taxes. The actual amount will depend upon your tax bracket as well as any deductions from expenses and so forth.

    This is really an issue you should speak to your accountant about. And, if you've been under the impression you don't need to report income under $600, you either need to find an accountant or find a different one, pronto!
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    • Profile picture of the author JonStein
      Originally Posted by Dan C. Rinnert View Post

      You have to pay taxes on your income whether it's $10 or more than $600. The $600 is the threshold for which a payer is required to report the payment to the IRS. You are still required to report that income even if it's $500. And woe will be you if you ever get audited and haven't been reporting income under $600.
      If your income is less than the requirement set by the IRS (changes annually) you do not need to file. However, If you made more than $400 as a self employed individual you HAVE to file because of the SE tax
      .
      The $600 stipulation is usually '1099 wages' paid to you by a company that hired you as a non-employee. This does not mean that you have to pay tax on the $600, (as you may not owe any).

      In fact, as long as your total income is below the filing requirement set by the IRS, you do not need to file any tax form.


      Generally tax rates start around 18% for individuals who earn less than $15K per year, and as high as 30% for earners over $70K per year.

      There are a few exceptions to this rule and those can be found on the IRS website at Do You Need to File a Federal Income Tax Return?
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      • Profile picture of the author dljmktg1
        For the 2008 tax year, if you were single with no dependents, you got:

        5,400 - standard deduction
        3,500 - personal exemption

        So, if your total income for the year was under the sum of the two, 10,900 your total income tax due would be zero. You are below the filing requirement. Of, course you should file anyway for refunds of tax withheld, and other reasons.

        Now, a lot of us here (maybe most) are affiliates (independent contractors) of various businesses. If we make under 600 from them, they are not required to file a 1099MISC with the IRS. But, as has been pointed out already, even if we only make one dollar, we are required to declare it as income. Even if the business paying it to us does not report it.

        The average person pays 10% on their taxable income. Keep in mind that this is taxable income and not total income. You could make 50,000 before all the deductions, exemptions, adjustments, and credits and only have 15,000 of taxable income.

        By the way, the IRS is expected to audit 1 in 67 taxpayers this year. That's about triple the number as in past years. Some of the areas they are expected to focus on are business use of home and self-employment income. There are others, but these are the main ones that affect us.


        Dan
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  • Profile picture of the author askmichaelknowles
    but if you want to be in Obamas cabinet then you don't have to pay
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  • Profile picture of the author Adrian Cooper
    Get yourself an offshore company and bank account.

    A company is legally a separate entity that is not domiciled in the USA. Also the company pays 0% tax.

    You are theoretically taxable on the cash you take out of the company, but you only take out what you need, and there are legit ways of accounting to deal with tax.
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