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Extra!: Federal Income Tax
CNN STUDENT NEWS(CNN Student News) -- April 15 is traditionally the last day when U.S. taxpayers can file their tax returns (or appropriate forms) with the federal government without being penalized. Because April 15 falls on a Saturday this year, the 2006 deadline is April 17 for most of the country. Use this Extra! to help students understand federal income taxes. BackgroundThe 16th Amendment to the U.S. Constitution, ratified in 1913, gives Congress the power "to lay and collect taxes on incomes..." The federal income tax is a product of that amendment, and it has been the source of much debate ever since. Income tax is a complicated subject, but in its simplest terms, the federal government takes a percentage of one's earnings, based on the amount one earns, to pay for the services and programs that the government provides. In that sense, the federal income tax is often referred to as a "progressive" tax, or simply put, the more money you make, the more taxes you have to pay, although there is a point where the percentage you pay levels off no matter how much you earn. How much should the government tax?Some favor cutting taxes on individual and business earnings, believing that if people have more money in their pockets, they will spend it, invest it, or expand their businesses and therefore help stimulate the economy. Others oppose tax cuts because they believe that the government should provide basic services and programs to all people, and they suggest these programs might lose their funding if the money from the cuts is lost. Some terms to knowGross Income - Money, goods, services and property that a person receives before taxes are taken out. Income tax rate (or tax bracket) - The percentage of tax one pays based on one's earnings. Because the federal income tax is progressive, those who earn the least are taxed at the lowest rates, with some paying no tax at all. The more a person earns, the higher the percentage of earnings that he/she pays in income taxes up to a point. In general, federal income tax rates in the U.S. vary from 10 percent to 35 percent. IRS (Internal Revenue Service) - The federal agency that collects income taxes in the U.S. Tax Cut - A reduction in the amount of taxes paid to the government. Tax Day - April 15, the last day when U.S. taxpayers can file their tax returns (or appropriate forms) with the federal government without incurring a penalty. Because April 15 falls on a Saturday this year, the 2006 deadline is April 17. Tax Deduction - An amount (often a personal or business expense) that reduces the income that is subject to tax. Withholding - Money that employers withhold from employees' paychecks in order to pay federal taxes. This money is deposited for the government to use as future tax payment. Sources: IRS.gov and the Tax Foundation 
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