The Tax System in the USA

Taxes are money paid by U.S. citizens and residents to federal, state, and local governments. Taxes pay for services provided by the government. There are different types of taxes, such as income tax, sales tax, and property tax.

Income Tax

 Income tax is paid to federal, most state, and some local governments. “Taxable income” is money that you get from wages, self-employment, tips, and the sale of property. Most people pay income taxes by having money withheld from their paycheck. The amount of income tax you must pay depends on how much you earn. Income tax rates are lower for people who make less money. Anyone who earns income, resides in the United States, and meets certain requirements needs to file a tax return and pay any taxes they owe.

The Internal Revenue Service (IRS) is the federal agency that collects income tax. Taxpayers file a federal “income tax return” Form 1040 with the IRS each year. Your tax return tells the government how much you earned and how much in taxes was taken out of your paycheck. If you had too much taken out of your paycheck, you will get a refund. If you did not have enough taken out of your paycheck, you must send a payment to the IRS.

Social Security and Medicare Taxes

These federal taxes are withheld from your paycheck. Social Security provides benefits for certain retired workers and their families; certain disabled workers and their families; and certain family members of deceased workers. Medicare taxes pay for medical services for most people over age 65. In most cases, you must work a total of 10 years (or 40 quarters) over the course of your life to get Social Security retirement benefits and Medicare benefits. You may need fewer than 10 years of work to get disability benefits or for your family to get survivors’ benefits based on your earnings.

Sales Tax

Sales taxes are state and local taxes. These taxes are added to the cost of buying certain things. Sales taxes are based on the cost of the item. Sales taxes help pay for services provided by state and local government, such as roads, police, and firemen.

Property tax

A W-2 is a federal form that lists your earnings and the taxes you paid for the last tax year. A tax year is from January 1 to December 31 of each year. By law, your employer must send you a W-2 form by January 31 each year. You will receive a W-2 form for each job you have. You must send a copy of your W-2 form with your federal income tax return to the IRS. If you live or work in a state that collects income tax, you must send a copy of your W-2 with your state income tax return

Getting Help With Your Taxes

As a permanent resident, you are required to file a federal income tax return every year.This return covers your earnings for January to December of the past year. You must file your return by April 15. You can get free help with your tax return at an IRS Taxpayer Assistance Center. You don’t need to call ahead.

Taxpayer Assistance Centers are located in communities across the United States. To find the Taxpayer Assistance Center where you live, visit To get help by phone, call the IRS at 1-800-829-1040.

What the government does for you

Taxes pay for the services the federal government provides to the people of the United States. Some examples of these services are:

  • Keeping our country safe and secure.
  • Curing and preventing diseases through research.
  • Protecting our money in banks by insuring it.
  • Educating children and adults.
  • Building and maintaining our roads and highways.
  • Providing medical services for the poor and elderly.
  • Giving emergency help when natural disasters strike, such as hurricanes, floods, or earthquakes.