The term income tax is one of the most basic of all tax principles. It is the tax that is levied on the net personal or the net business income. The Internal Revenue Service for the federal government collects this type of tax, though states and local communities may also charge an income tax. This tax is used to fund the governmental organizations and programs. Income tax is not an option. The amount of tax paid is also based on the amount of income the individual has, and where that income amount fits into a specific tax bracket. This income amount may change from time to time. Income tax is collected throughout the year through payroll deductions, but needs to be reconciled yearly.