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Voluntary Income Tax

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Definition: "A system of compliance that relies on individual citizens to report their income freely and voluntarily, calculate their tax liability correctly, and file a tax return on time," according to the Internal Revenue Service.

The income tax system is voluntary. That's because people are free to arrange their financial affairs in such a way to take advantage of any tax benefits. Voluntary does not mean that the tax laws don't apply to you. Voluntary means you can minimize your taxes by taking advantage of various deductions and tax credits.

Voluntary also means that you must tell the IRS what your tax liability is. And the only way to do that is to file a tax return.

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