Encyclopedia > Tax return

  Article Content

Tax return

Tax returns (in the United States) are forms filed with the Internal Revenue Service or with the state or local tax collection agency (California Franchise Tax Board, for example) containing information used to calculate income tax or other taxes.

The standard US individual tax return is Form 1040. There are several variations of this form, as well as many different supplemental forms.

Americans who earn more than a specified amount (which changes occasionally, as of 2002 about $5000) are required by law to file tax returns (and pay remaining income taxes if applicable). Earnings are to be counted whether or not they arise from legitimate businesses - for example, income on sale of illegal drugs is taxable. Many criminals, most famously Al Capone, are indicted not (or not only) for their crimes, but for failure to file tax returns (and pay income taxes) on their ill-gotten gains.

Many Americans find the process of filling out the tax forms more onerous than paying the taxes themselves.

The majority of income tax is deducted from employee paychecks throughout the year; if calculations indicate that the individual has overpaid, they are due a refund. Many Americans get a "tax refund" based on the calculations in their tax return. Contrary to popular opinion, getting a large tax refund is not the best outcome of a tax return; instead it indicates that the individual in effect gave an interest-free loan of the refund amount to the government. Optimally (mathematically), a return should result in a payment owed of just less than would cause a penalty charge. However, some people use the tax refund as a simple "savings plan" where they're pleasantly surprised to get money back each year (even though it is excess money that they paid earlier in the year). Another argument is that it is better to get a refund rather than to owe money, because in the latter case one might find oneself without sufficient money in the checking account to pay the necessary payment.)

See Taxation in the United States.



All Wikipedia text is available under the terms of the GNU Free Documentation License

 
  Search Encyclopedia

Search over one million articles, find something about almost anything!
 
 
  
  Featured Article
Boxing

... quietly promoted boxing as a humane alternative to the deadly Irish Code Duello. Certainly it was promoted by the class of English gentlemen that were prone to ...