About Income Tax Returns
Payroll taxes (FICA or social security) or sales taxes are flat. However, the same is not true of income taxes. They are the one tax all Americans must deal with, but the tax is not a simple payment collected at a flat rate. Instead, owed income taxes are determined according to an often complicated tangle of how much is earned, how it was earned, exemptions, and deductions. The face of this annual source of frustration is the income tax return, the means by which the federal (and perhaps state or even city) government collects financial information on its citizens.
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Identification
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A tax return is a report filed to the Internal Revenue Service (IRS) or a state or local agency reporting earned income. This report is used to calculate and state the amount of income tax owed, and it's used to collect financial information on United States citizens and corporations. So, for example, a resident of Kentucky will need to file a return with both the Federal IRS and the Kentucky Department of Revenue. However, some states have no income tax and no state income tax returns. Yet, all citizens are required to file a federal tax return. This is always done using forms issued by the requisite agency (the IRS or a state tax department), and it's oftentimes with the help of an accountant.
Misconceptions
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A common misconception is that tax returns are only filed by private citizens regarding their income. There are, in fact, many other forms of returns. Employers, for example, must deal with the Employer's Annual Federal Unemployment (FUTA) Tax Return and corresponding Form 940.
It is also common for the terms tax refund and tax return to be confused. A tax return is the information you provide to the government on earnings and owed taxes. A tax refund is the amount of money the government may owe you because over over payments from payroll withholding.
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Features
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The average American deals with tax returns through four pieces of information. First are the Form 1099 and W2, through which employers provide employees with statements on how much they have earned. It also reveals how much has been withheld for income taxation. Next are the Forms 1040 and 1040EZ, through which a citizen is required to state all income (including that not covered by existing 1099s and W2s), and he must process that through the form to determine the amount of tax owed. All tax forms are available online or in print at public locations like libraries and post offices.
Function
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The W2 and 1099 act to ensure that income earners will provide reasonably accurate information about their income and owed taxes. Most people earn all of their income from wages or salaries from employers who report their payments to the government, leaving a long paper trail for those who choose to falsify income tax returns.
It is also a legal obligation to file a tax return, even if the purpose is simply to state that no tax is owed. This in and of itself is a useful means of collecting information and regulating the population. For example, Al Capone was famously jailed for failure to pay income taxes on income earned through illegal activities.
Considerations
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A famous form of tax protesting is the "Fifth Amendment" movement. This describes a tax return that (supposedly) reports all income and owed taxation accurately, but the tax payer refuses to reveal anything about the source of the income in question. This is sometimes done by criminals seeking to avoid Al Capone's fate, but it's also done by those who deny that the United States government has the legal authority to collect some or all of the information required by income tax returns.
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