Final answer:
True, wages, tips, and bonuses are taxable unless excluded by law. Taxes fund essential government services and public infrastructure, and failing to report and pay them can result in penalties. Both employers and employees are often required to contribute to various taxes derived from wages.
Step-by-step explanation:
True, all wages, tips, and bonuses are taxable income unless specifically excluded by law. This includes money earned from full-time or part-time employment, as well as earnings from self-employment, the so-called "1099" or "gig" economy, and other forms of compensation. Taxes are used to fund government programs and public expenditures that benefit the community, such as roads, schools, and public safety. Not reporting and paying taxes on earned income can lead to penalties such as fines or imprisonment.
Deductions from an employee's wages, like withholding tax, social security, and various insurances, are mandatory and facilitate the contribution to governmental funds. Employers also pay taxes based on employee wages, which contribute to social security and insurance programs. It's important to note that generally, the cost of living can affect the amount of taxes and take-home pay.
Taxes are also applied when consumers buy goods and services. Taxes are a universal aspect of employment and consumption, funding essential services and infrastructure. Therefore, it's critical for individuals to understand their tax obligations on all forms of income.