Question

All sources of income are taxable unless specifically excluded through a tax provision. Deductions, however, are NOT permitted unless a specific tax provision allows them. Deductions are a matter of ______ _________.

Answer 1

Deductions from income are allowed only when specifically permitted by tax laws, and this principle is known as 'legislative grace'. Taxes deducted from wages include advance payment on income tax and contributions toward social insurance programs, while taxes support a range of public services and infrastructure.

Step-by-step explanation:

Deductions are a matter of legislative grace, meaning that they are not allowed unless specifically authorized by law. Income sources are generally taxable unless there's a provision excluding them from taxation. When it comes to deductions from an employee's wages, these typically include withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG), covering advance payment on income tax, social security contributions, as well as various insurances. Meanwhile, taxes paid by an employer based on employee wages are intended to support social security and other insurance programs.

Taxable income is calculated by subtracting deductions and exemptions from your adjusted gross income (AGI). It is important to understand the differing tax rates and potential tax credits available. In some states, income tax is not levied, and taxes paid to the state can often be deducted from federal taxes. Fiscal taxation contributes to funding vital public services and is essential for a country's welfare. The Internal Revenue Service (IRS) is responsible for the collection of federal taxes, while the appropriation of this revenue is conducted through Congress.