How Income Taxes Work
The Internal Revenue Service estimates that taxpayers and businesses spend 8.1 billion hours a year complying with tax-filing requirements. To put this into perspective, if all this work were done by a single company, it would need about four million full-time employees and be one of the largest industries in the U.S.¹ As complex as the details of taxes can be, the income tax process is fairly straightforward. However, the majority of Americans would rather not understand the process, which explains why more than half hire a tax professional to assist in their annual filing.² The tax process starts with income, and generally, most income received is taxable. A taxpayer’s gross income includes income from work, investments, interest, pensions, as well as other sources. The income from all these sources is added together to arrive at the taxpayers’ gross income . What’s not considered income? Child support payments, gifts, inheritances, workers’ compensation benefits, welfare be