Dominic earned $1,500 this year, and his employer withheld $200 of federal income tax from his salary. Assuming that Dominic will have zero tax liability this year, he is not required to file a tax return but should file a return anyway.
The Internal Revenue Service (IRS) imposes the federal income tax in the United States on the annual profits of people, businesses, trusts, and other legal entities. All sources of income that contribute to a taxpayer's taxable income, such as wages, salaries, commissions, bonuses, tips, investment income, and certain categories of unearned income, are subject to federal income taxes.
Federal income tax rates range from 10% to 37%, and they become effective at a certain level of income. Tax brackets are the ranges of income that the rates apply to. Each tax bracket has a different rate of taxation that applies to certain types of income.
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