Tax returns provide a report of income and profits to the Internal Revenue Service. Taxpayers are allowed to claim various deductions to minimize taxable income to the lowest possible level, and it provides the IRS with the required data.
How does a tax return work?
A tax return is a set of documents that taxpayers send to the Internal Revenue Service showing the taxpayer’s various sources of income, deductions, credits, and other information. The purpose of the return is to provide the IRS with the necessary information for those earning a certain amount of money, and for the IRS to receive payment from you or refund you based on your tax obligation.
Do I need to file a tax return?
Not everyone is required to file a tax return. It is only necessary if you earn more than the standard deduction for your tax filing status or if you owe a different type of tax such as the alternative minimum tax. For example, when filing your taxes for the 2022 tax year in 2023, the standard deduction for a single filer under 65 years old is $12,950. Generally, you do not need to file a tax return if you earned $12,950 or less. Here’s how it breaks down for all filing statuses for the 2022 tax year:
- Single: $12,950
- Head of household: $19,400
- Married filing jointly: $25,900
- Qualifying widow(er): $25,900
The standard deduction does not apply to married taxpayers who file separately. They must file a Form 1040 if they have just $5 of income. For instance, you must file a tax return regardless of age if you and your spouse did not live together at the end of 2022, and your total income is at least $6. Different rules apply to taxpayers who may be claimed by another taxpayer as a dependent.
Sections of a tax return
A Form 1040 tax return consists of two pages that you must fill out. Income, credit, and deduction information is located between a section at the top for your identification information – the filing status you are using, along with your name, address, and Social Security number – and the signature area at the end.
Income section
The first part of the tax return covers taxable income, with each part labeled. For instance, there’s a line where you enter “wages, salaries, tips, etc.” This information is found on any W-2 forms you received.
Deductions section
The next part of the tax return covers deductions. Deductions reduce taxable income, thereby lowering the amount owed. There are two main deductions here: total standard deductions or itemized deductions, and any qualified business income.
Tax credits and taxes paid
The second page of the tax return calculates the tax owed on taxable income. This is where the amount that has already been withheld from your paycheck is recorded, along with any estimated tax payments you made during the year. Some refundable tax credits can also be deducted here, as they act just like payments made in advance.
Tax return vs. tax refund
A tax return is an assessment of what you owe to the IRS – or what the IRS owes you. A tax refund is a payment made to you by the IRS because you paid more in taxes throughout the year or you qualified for one or more refundable tax credits.
For example, let’s say you are a single individual falling under the single filer category, working for an employer. Your total gross income before any deductions was $35,000 for 2022. A total of $3,500 was withheld from your paychecks throughout the year. If you had no adjustments to your income and only used the standard deduction of $12,550, your taxable income would be $22,450. Based on this taxable income, the taxes owed would be $3,570, but since you have already paid $3,500 in taxes throughout the year, you would only owe $70 and you would not receive a tax refund.
And with
That is, if everything is similar, but there was $4,000 withheld from your wages throughout the year for taxes, you would receive a tax refund of $430 from the Internal Revenue Service.
Frequently Asked Questions (FAQs)
Is a tax return a tax refund?
A tax return is not a tax refund. Your return is the paperwork you file – usually Form 1040 and supporting documents – to determine whether you owe taxes or if the Internal Revenue Service owes you a refund. A refund is what you receive when you have paid more taxes than you should have.
Is a W-2 form a tax return?
A W-2 form is not a tax return. The W-2 form is an income document that employees receive at the beginning of the year. Among the things included on the W-2 form are the income you earned and the taxes that were withheld from your paycheck.
Source: https://www.thebalancemoney.com/what-is-a-tax-return-5114242
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