cjj wrote:
It's really not all that complicated (well, actually, it is). You really don't get any taxes back, you get the amount that you've overpaid back. In the simple case your employer takes out some amount of income tax on every paycheck. At the end of the year, you figure out how much you really should have paid. This amount can vary based on certain things which are allowed to be deducted (this is where it gets complicated), things like certain medical expenses, some interest payments, and all sorts of other things.
This makes your "taxable" income less than your actual income. If you paid in more over the year than you owe based on the "taxable" income, you get some of what you paid in back.
Now, when it comes to business income, it gets far more complicated. There are numerous things that become tax deductible based on being a cost of doing business. So, even though the business brought in some amount of money, the cost of supplies, etc. can be deducted from the income since you could not have made the income without spending the money for the supplies. Then there are depreciation schedules for expensive equipment, where you can deduct some of the cost of the equipment each year for a number of years. This is similar to deductions for supplies. And it just goes on and on the larger and more complicated your business becomes.
Note that I'm in no way any sort of tax professional, so I've probably got stuff wrong in my explanation, but I think it gives the general idea.
Thanks, that's the same as in Israel then, basically - a business (from self employed (with restrictions) to large corporations) register their expenses and the income tax is (roughly) calculated by the income minus expenses, every $ you spend on the business is tax deductible (VAT
and income tax)
However - personal people (regular employees such as myself) don't send anything, the accountant at the company they work for is doing everything for them, since the income tax in Israel (and in the rest of the world AFAIK) is calculated yearly, not monthly - if an employee gets an extra money at a specific month (bonus, etc...) - the accountant takes that into consideration and balances everything so at the end of the year, nobody pays even a dime extra or a dime less, basically an employee doesn't need to send anything out and no audits are being made at all.
The only exception is tax deductible expenses for employees such as life insurance that is being paid not through the company you work for (pretty rare) and - if you worked only half year, it's up to you do get the tax back at the end of the year (as there is no accountant to do it for you).
For some reason I got the feeling that employees in the states get some tax back which is quite nice, yet weird.
, I feel that I treat everyone the same, whether it's the sole proprietorship of a small business or a Fortune 500 company.
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