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Federal Individual Income Tax

The United States is the only country that taxes its taxpayers on their “worldwide income.”  As an American, we all have the equal opportunity to remit income tax regardless of where the income is earned.  Whether you are earning income from a business abroad, or you are an employee on an international rotation, the United States requires that you pay your fair share to the government.

This is the fundamental tax system in our country.  The easiest way to picture this tax system in theory is to imagine skiing down a double-black diamond in a straight-line.  On the first of January every year, we all sprint off to earn our income until we reach the end of our tax year on December 31st and cross the finish line.  The race is a straight-line down a steep slope because all of your income becomes taxable as an individual taxpayer faster than you surviving a double-black diamond.  The federal individual income tax system does not leave many options available for you to limit your taxable income excluding the few exemptions and deductions the Internal Revenue Code permits.

Federal Corporate Income Tax

In contrast, federal corporate income tax is like skiing down a trail with multiple lanes where you have no idea which path is the shortest.  Corporate income tax, unlike the individual income tax, has a variety of means for taxpayers to lower their taxable income.

The Internal Revenue Code allows businesses to have a large amount of wiggle room and gray areas to maneuver.  Thus, taxpayers have the ability to make tax decisions that may either save or cost you money.  It is vital for businesses to have proper tax planning because corporate income tax is one of the greatest expenses for any business.