In addition, there are two several types of income taxes, federal and state. Federal income tax is a tax levied by the IRS on the yearly earnings of individuals and corporations. Federal income taxes are applied on all forms of earnings of a taxpayer’s taxable income, such as employment earnings or capital gains. Tax is collected from individuals and corporations by the city, state, or country in which the entity resides or operates. When the tax collected is credited to the government of the country’s account, it is referred to as federal tax. Federal tax is the money used by the government of a country to pay for the growth and upkeep of the country. The greatest source of revenue for the federal government comes from the income of its residents.