Final answer:
U.S. citizens and resident aliens must pay federal income tax on their world-wide income (Option A). Taxable income is computed using the adjusted gross income minus standard deductions and exemptions, under a graduated progressive tax system. Option A
Step-by-step explanation:
U.S. citizens and resident aliens are subject to federal income tax on their world-wide income, which answers the question with option A. This means that all income earned, whether it is from within the U.S or from foreign sources, must be reported to the Internal Revenue Service (IRS) when filing taxes.
The federal income tax system uses a graduated progressive tax structure, meaning the rate increases as the taxable income increases. The 1040EZ form, while being the simplest tax form, also illustrates that even a basic tax situation can be complex. Taxable income on the 1040EZ is calculated by taking the adjusted gross income and subtracting the standard deduction and exemption.
For instance, in 2010, the total of the standard deduction and exemption for a single person was $9,350. Figures like the Revenue Act of 1942 highlight historical changes in the tax code, emphasizing that previously, not all income was subject to tax.
But today, almost all forms of income are taxable, and taxpayers must file and pay federal taxes according to the guidelines, which include not just U.S. income but also worldwide earnings. Option a