Federal Income Tax

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What is the Federal Income Tax

Income taxes in the United States are imposed by the federal government in every state. Federal income tax is a governmental levy on income. In the voluntary federal tax system, individuals complete a federal income tax return, where either they owe the federal government tax that was not paid throughout the year or the government owes them tax that was overpaid.  

The federal income tax rate may increase or decrease income, in accordance with certain deductions, exclusions, credits, and additions to income, which are applied to the federal tax rate, which will result in either a refund or an amount of tax owed. 

Some people owe and  some people receive a federal income tax refund at the end of the tax year. Congress has created deductions and exclusions from the federal income tax to reflect public policy and the governmental agenda. 

Income is very broadly defined in the Internal Revenue Code (IRC). Income for federal income tax purposes and in accordance with IRC §61, is funds from whatever source derived, unless specifically excluded from income by the IRC. In other words, all income is taxable income for federal income tax purposes unless the IRC specifically states that it is not. 

How Much is Income Tax in PA

The Philadelphia (“PA”) personal income tax is levied on personal income at a rate of 3.07% on taxable income of residents and nonresidents of PA who earn income in the state.   Those subject to the tax include individuals, partnerships, LLCs, estates,and trusts not taxed federally as corporations.

The PA personal income tax does not provide for a standard deduction or a personal exemption as the federal system does. The PA tax is a flat tax. Individuals, however, may still reduce their tax liability through certain exclusions, deductions, and credits. 

The Commonwealth of Philadelphia provides (3) primary methods for collecting taxes in PA:

  • estimated and final payments from individuals
  • employer withholding
  • estimated withholding from nonresident partners or shareholders by partnerships and S corporations.

The tax is levied on federal taxable income, modified by certain additions and subtractions. Some of the additions include bonus depreciation for businesses and certain tax preference items. Some of the adjustments include the corporate dividends received deduction and interest on U.S. securities such as Treasury Bills. 

How Federal Income Tax Lawyers Can Help

When you are the subject of a tax audit, you might need an experienced tax lawyer who will assist you with your case.  You might therefore consider retaining an attorney at this stage. We are lawyers for federal income tax and state tax purposes who will fight for you. A knowledgeable tax lawyer can provide significant guidance and represent you before the applicable tax authorities if that becomes necessary.    

Facing a tax audit – whether state or federal – can be daunting.  Indeed, some parts of the federal tax court systems put the burden of proof on the taxpayer rather than the government.  That’s where we come in. We know what may work and what likely won’t work when dealing with government tax authorities.  .

Whether you are being audited by the IRS or the state, or just have questions regarding income taxes, contact us at any time for help from one of our experienced tax attorneys. Our lawyers will assess your situation and advise you on some of the better ways to proceed based on your specific needs and goals – whether that means negotiating a settlement with the IRS, defending against an audit action, or going to court if necessary.


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