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tax

Why it is Important to Pay Taxes

 

IRS Tax

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Tax is a compulsory payment or contribution made by citizens of a country to the government for the general benefit of the society in which they live.  We pay taxes at different level viz., federal, corporate, state, and municipal/local governments enact tax laws.

Why taxes are important for economic growth

It is a fact that governments need sustainable funding for social programs, and public investments to promote economic growth and development.  Such programs provide health, education, infrastructure, and other amenities which are important to achieve the common goal of a prosperous, functional and orderly society. Moreover, there is an obligation on the part of the government to maintain the stable economy. Generally, wild fluctuations in prices are harmful to the economy of a country.   Declining prices for example, as witnessed during the Global Financial Crisis, causes depression which leads to a fall in company profits, saving, investments, employment and the Gross Nation Product (GDP).  Conversely, constant rising price creates problems of discouraging savings and further weakens incentives to improve efficiency on the part of entrepreneurs.   In order to support the government program, there is a need to raise revenues from potential sources, and Internal Revenue Service (IRS) is one such agency to manage tax collection.  IRS is the revenue service agency of the federal government and is part of the Bureau of the Department of the Treasury.

Tax collection or payment is not merely a payment against availing public and services.  It is a key ingredient of the social contract between citizens and the country.  By paying tax you are contributing to nation building as well you are creating a record about your financial activities.  This will help you to improve your creditworthiness in order to process your request for financial assistance/loan from public agencies.

Here is a quick glance over how tax payment plan of federal, state, and local governments utilized.

Federal

  • Largest national expense is payments to seniors for Social Security.
  • The next largest service is defense. That includes support agencies like Homeland Security and the Veterans Administration.
  • The third largest service is Medicare. Payroll taxes only cover 60% of these expenses.  Like Social Security, you are paying for services you’ll receive after you turn 65.
  • Medicaid is the fourth largest service. You only receive this if your income falls below a certain level.
  • Other welfare and government retirement programs.
  • All other government agencies include Health and Human Services, Education, and NASA.

State

  • The largest state expenditure was for social services, including Medicaid, welfare, and public housing.
  • Most of this was for employee retirement, education, transportation, and health and hospitals.

Local

  • The largest local expenditure for education and libraries.
  • Water and sewer services cost Administration toward retirement, but many cities are underfunded.
  • Local government paid police and fire services, transportation, and health and hospitals.
  • Welfare and public housing cost and parks.

Conclusion

Taxes ensure that government can build and maintain the necessary infrastructure – education, healthcare, transportation systems – to attract investment and businesses, and thrive in a competitive global economy and allow citizens, residents and businesses to do things together that we could never do on our own.

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Upcoming Tax Deadline

If you’ve requested a six-month extension to submit your taxes then your deadline is coming up quick! October 16, 2017 is the last day to file your individual or corporation return. This includes the 1040, 1040A and 1040EZ or 1120 tax forms. Beware of penalties for late payments or filing.

Don’t let this extra time go to waste. Be sure that you file your return immediately and see if you qualify for common credits and deductions. Low and moderate income families may be eligible for special tax benefits as well.

According to the IRS, you could also receive credit if you’ve paid college tuition or fees in the last year. Same goes for those that have made their homes energy efficient.

E-filing will reveal guides and tips to help you complete your return, but you can also call us for a one-on-one consultation with a tax professional. If you’ve missed important deadlines in the past or fear you won’t get the paperwork done in time for the upcoming deadline please give IRS Audit Group a call to learn how we can help resolve your tax issues ASAP.

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