Federal Income Tax (FIT)
Sneha Gondhale Federal income tax is a progressive tax the U.S. federal government imposes on individuals and entities based on their income. The Internal Revenue Service (IRS) collects and manages it, which means individuals and businesses have to report their income, deductions, and credits every year through a tax return. Tax rates go up as income increases, and the revenue collected funds government services and programs.
Taxable income varies by filing status, but the following types of earnings are generally subject to federal income tax:
- Wages and salaries (including self-employment income)
- Bonuses and cash gifts from employers
- Tips and commissions
- Unemployment benefits
- Cancelled debts
- Business income
- Gambling income
- Capital gains