Don't have to pay taxes?

[Amedeus]

2. Furthermore, if you are talking about $50,000 annual income, the tax rate won’t be anywhere near 46%. Assuming you’re not working (so no social security tax), you’d be at around a 28% top marginal tax rate. You’d actually pay less than that, since a bunch of your income would only be taxed at 15%.

I was under the impression that interest is considered a non-earned income. And hence is charged similar to what they tax lotteries and gifts, 43-46%. This is just an assumption from a friend who has his own buisiness, so the whole fallicious appeal of authority could be stated. I searched around on the Irs webpage for over an hour trying to find any reference to it and finally gave up, taking my friends word for it. Is he wrong in this? I would definately be happy to know that they don’t charge interest as a non-earned income.

[occ]

*Originally posted by suziek *
**Employers are required to issue a W-2 to employees and a 1099 for money over $600.00 (I think) paid to contractors. It is not voluntary. Employees don’t have anything to say about this. He many be talking about withholding, which is mandatory unless you have reason to think you won’t owe any tax or you are a student, and a few other minor exemptions. Basically, you have to pay your tax as you earn the income, through withholding or paying estimated tax quarterly.
**

I don’t think you are required to withhold taxes from your income; I was under the impression that this was merely to protect the taxpayer from being hit up with a bill they were unable to pay come April 15th. I noticed my paychecks were having too much withheld (over 30%), and since I’m short on cash now, I asked if they could withhold zero. The accountant had no qualms about doing it, so I don’t think its illegal.