INCOME TAX DEBT
Most people do not like hearing about income tax because it sends a message even to their subconscious as something that is meant to take away from them. Even though it is something they must do as it is stipulated so by law, it is usually a thing of joy when you enjoy the things it is spent on especially when a country or locality is governed by a responsible government. Income tax is a percentage of money taking from the income of an individual, company, or any entity that earns an income especially from business transactions. A percentage of the income determined by law is normally taken from the income of such an organization or individual and paid to the Internal Revenue Service, a government agency saddled with enforcement of tax laws and revenue mobilization for the government. The internal revenue service then sends all the tax monies collected to the government treasury. Some people and organizations fail to pay their income tax a situation which results in income tax debt.

It is very important for organizations to report their incomes and calculate their income tax from there. All organizations are expected to file their income statements, even organizations that are not-for-profit that are usually exempted from paying income tax by the law are expected to file their income or they stand the risk of their tax exemption status being revoked. This is to ensure that such organizations are truly not-for-profit entities and to ensure compliance of such entities to the provisions of tax regulation and administration. In situations where it is discovered that an entity is hiding under the tax exemption granted them to carry out activities just to evade tax payment, such privileges are immediately withdrawn and stern penalties given which may include payment of taxes over the period such illegal activities were carried out. This situation will certainly result in an income tax debt.

One of the easiest ways to avoid income tax debt is to pay your tax regularly as your income comes. This is known and commonly referred to as ‘Pay As You Go’. With this kind of method you do not wait till the end of the year before you make your payments. It can become cumbersome with such arrangements at the end of the year and the tendency for one to default or not pay the correct tax is often very high in this kind of situations. That is why it is normally advisable to take the deductions as the money come in and make the tax payments, that way to save yourself and your organization the troubles of handling difficulties that are common with income tax.

It is really nice to know that despite how important income tax is, there are some things that are not taxable. Hence, one cannot incur income tax debt on such things. Some of these instruments that are not taxable include gifts, inheritances, and charity donations. However, financial statements relating to these instruments must be submitted regularly to the tax authorities regularly as stipulated by law.