Income tax is the amount of money a person or a business needs to pay the government based on income. This tax is used to fund things like healthcare, education, and social security.
Income tax is calculated based on a person’s salary or wage. An employer may choose to deduct the relevant amount directly from the paycheck or through a process called withholding.
Types of income tax
There are three main types of income tax. These include federal income tax, state income tax, and local income tax.
There are also certain taxes which may be classified indirectly as income tax (like the capital gains tax for profits gained from sales of assets – stock and real estate, for example).
Managing income tax for a global workforce
Companies navigating income tax while managing a global workforce may face extra challenges, including:
- Currency conversion
- Local tax reporting
- Navigating tax treaties
- Complying with tax laws
A global payroll solution can step in by offering the tech infrastructure necessary for accurate and compliant tax payments involved in payroll across multiple countries. Additionally, they can offer advanced tax expertise across different countries, including any tax treaties that might exist.