Federal income tax is a type of tax levied by the United States federal government. Taxpayers who earn income within the country are required to pay federal income tax on that income. Federal income tax is composed of three main parts: personal income taxes, sales taxes, and excise taxes.
To know more about federal income tax, you may check here.
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Personal income taxes are payments that are made by taxpayers based on their incomes. These taxes include the basic regular federal Income Tax, which applies to all individuals regardless of their source of taxable income; the alternative minimum tax (AMT), which applies to high-income taxpayers; and the Medicare payroll tax, which applies to employees with wages above a certain amount.
Sales taxes are collected by states and cities from consumers at various points in the purchasing process. The most common type of sales tax is the value-added or retail sales tax, which is charged as a percentage of the sale price. Other types of sales taxes include fuel taxes, property taxes, and user charges for services such as parking or cable TV franchises.
The Pros of Using a Personal Corporation
1. You can reduce your federal income taxes.
2. You can make more money by operating as a personal corporation rather than an S-corporation or C-corporation.
3. You can keep more of your profits if you run a personal corporation as a sole proprietorship or LLC instead of an S-corporation or C-corporation.
4. You're less likely to be audited by the IRS because personal corporations are not subject to corporate audits.
5. You have more control over your business decisions when you operate as a personal corporation rather than an S-corporation or C-corporation because the shareholders in these types of corporations are not voting members of the board of directors.
