Understanding Taxes
To help fund public works and services—and to build and maintain the infrastructures used in a country—the government usually taxes its individual and corporate residents. The tax collected is used for the betterment of the economy and all living in it. In the U.S. and many other countries in the world, taxes are applied to some form of money received by a taxpayer. The money could be income earned from salary, capital gains from investment appreciation, dividends received as additional income, payment made for goods and services, etc.
A percentage of the taxpayer’s earnings or money is taken and remitted to the government. Payment of taxes at rates levied by the state is compulsory, and tax evasion—the deliberate failure to pay one’s full tax liabilities—is punishable by law. Most governments use an agency or department to collect taxes; in the United States, this function is performed by the Internal Revenue Service (IRS).