Society and taxation
Introduction
The community has been relying on taxes collected for societal and government development of infrastructure and other social amenities. The taxation system started a long time during ancient Egypt. The Greeks and the Romans have mainly participated in the development of the taxation system. For a government to provide services that other businesses cannot venture in, it needs to collect tax from her people to meet the requirements and expectations of her people. The wealthy farmers and business people were raising taxes during ancient times. In the modern world, the tax system has evolved, as evidenced by many types of taxes and taxation systems. In the past, tax evasion was charged with death. In the current world, there are strict penalties for tax evasion. The profitability of the business is being determined by the amount of tax being paid by the organization. The company can make a loss due to the high amount of tax being levied by the government. The current taxation needs a company to employ expertise to analyze and advise on matters relating to taxation to protect the company from collapsing.
Society and taxation
Historically, the government has been relying on taxes to meet the expectations of her people in terms of providing essential services and infrastructure. The first documented tax system was implemented in ancient Egypt. The empires appointed tax collectors who determined the amount of taxes to be paid in proportion to the size of land and location for farmers. Citizens paid their fees by working in public works, and the receipts of paid amounts were issued to safeguard taxes. Greeks and Romans were exempted from paying taxes due to their free enterprise. Heavy taxes were imposed on foreigners and the wealthy people who also were to pay the direct fee to sports facilities. Provinces contributed a lot of taxes, and the empire began to provide bread for the citizens and free entertainment. The wealthy individuals were allowed to collect tax and remit advances to the government and cash to Rome. The system was unsustainable as the taxes were heavy to farmers and provinces, which led to the downfall of the empire.
The business impact of taxation
The legal structure of the organization is determining the profitability of any construction company. The profits are being reduced by the amount of taxes levied on the company. It’s paramount to understand the tax system of the government, and any financial choices affect the economic decisions of the construction company.
Reasons for taxation
The primary reason for imposition is to provide government services and meet societal expectations. Also, high taxes are meant to regulate some commodities for customers can avoid such products. Charitable and other domestic products are deducted partially or fully to motivate the users.
Types of taxes
Income tax is direct taxes levied on the company or individual income. Indirect charges on the other side are levied on the cost, price, or value of products and services. In US income tax was introduced in 1913 after the 16th amendment of the constitution.
Income tax systems
Taxable income is paid by companies calculated as;
Income= revenue-expenses
Individuals’ taxable income is calculated as;
Taxable income= gross income- deductions
In general,
Taxable income = Revenue –expenses-deductions
Income is defined as what an individual receives from wages, salary, inheritance, and sale of a property.
Taxation of businesses
The definition of revenue is the total amount of income from sales and other work performed by the company paid through the financial resources as per the tax law. Expenses of a construction company on the other side can be said to be indirect or direct expenses. Direct costs are incurred to realize the physical facility that is being constructed. Indirect expenses are overhead expenses incurred for a management job and administrative of the construction site. The income statements measure the financial position of the company. The report is written after a specified period. The revenue herein indicates the income receipts received from the operations of the company, and the expenses measure the expenditure used to generate the revenue.
Business deductions and taxable income
Deductions are considered to be a benefit as long as the government is accepting them. The deductions reduce the income that is subjected to tax. Constructions costs and general overhead deductions are allowed for a construction company. The depreciation deductions enable the company to pay lower taxes. The types of deductions and the degree of deductions need to be sifted through.
Taxable income is levied on the sole proprietorship on an individual basis. The personal tax can be categorized into single status, married filing separately, and married filing jointly and head of household.
Types of deductions
In this case, we have an itemized deductions approach is for construction contractors reporting the depreciation of property. Standard deductions can be deducted from the income instead of itemized deductions. Personal exemption is allowed if individuals are reported as dependents.
Tax significance of depreciation
Most tax agencies agree that property loses value, and that is depreciation. By depreciation, the taxes paid to reduce. Depreciation applies to all equipment used by contractors, and the process is considered as a profit center by the contractors. Aligning the declaration of depreciation of property is essential to offset the taxable income.
Marginal tax rates
The US has a progressive tax system whereby individuals with higher income pay high taxes compared to individuals with low income. There are minimal cases of regressive tax in the US. Income tax depends on the filling of the status and the taxable income on which the tax is being computed. The tax bracket for single people is different from the corporate tax table; hence the status matters a lot.
Tax credits and tax payroll withholdings
It can be said to be an allowance that can be deducted from the tax as it was computed previously. Employers are required to withhold a pay-check for the employees throughout the year to meet their tax requirements. The withheld amount can exceed the tax; hence needed can be refunded to the taxpayer.
Tax payment schedules
Corporations are required to pay their taxes every quarter. The action will avoid the accumulation of fees and tax evasion. Also, the companies are required to select their fiscal year that does not necessarily coincide with the calendar year to refer to when paying their taxes.
Marginal, average and effective tax rates
The marginal tax rate relates the tax to the tax bracket while the average tax rate compares tax to tax income. The effective tax rate is the ratio between tax income and income before subtraction of expenses and exemptions.