A tax return is a document filed with state or federal authorities that declares a taxpayers liability for being taxed, based on their yearly income. Three outcomes are possible from filing a tax return: either the taxpayer has either been charged too much or too little for their income, or they have been charged the correct amount. If they have been charged too much, the government must refund them, whereas if they have been charged too little, they must pay the difference.
Tax documents are often extremely complicated forms that frustrate many people. Aside from the rather basic principle of totaling up your yearly income and determining if you have been taxed the right percentage, they also include additions or subtractions for certain actions. In the United States, for instance, families may be able to take deductions for dependent children or for funding college educations. Self-employed workers may also be able to deduct work related expenses, such as part of their rent or gas mileage. Deductions can help increase your government return or reduce your payment, but they can be very confusing to understand.
Most countries require citizens to file tax returns once per year. In the United States, forms must be completed by April 15th for financial data of the previous January through December. In Australia, the fiscal year runs from 1 July through 30 June, and taxes must be filed by 31 October to avoid financial penalties.
Tax returns may be filed individually or on behalf of a family, called a joint tax return. Married couples may choose to file alone or together depending on what best suits their incomes. Children under 18 years of age, or sometimes those in college, may be considered dependents under United States tax law. This means that their income and deductions are included with their parents’ taxes, rather than separately.
The government body in charge of handling taxes is responsible for issuing tax return documents for citizens. These documents include wage statements such as the W-2, which is issued by employers, and tax forms that calculate amounts owed to the government by combining income and deductions. In American, the federal governing body is the Internal Revenue Service or IRS, although individual states have separate bodies for state taxes. In the United Kingdom, a tax return should be filed with Her Majesty’s Revenue and Customs (HMRC.)
In the United States a tax return can be done by the individual citizen, with the help of a tax accountant or certified public accountant (CPA,) or using specialized computer software. Using an accountant is considered by some to be the best choice, as they are very familiar with the system and may be able to help find deductions you would not have noticed. Tax return software has become very popular in the 21st century, as the IRS now allows some taxes to be filed online. The software can also limit mathematical errors and explain complicated processes.
Tax season is a source of dread to many citizens, although it is often the busiest time of year for accountants. While some people may be lucky enough to have been over-charged by the government and can expect a check in the mail, many are subject to under-taxation through complicated laws, and must pay their government for mistakes. Despite the considerable bad feeling associated with filing a tax return, bear in mind that taxes are what keep water in the faucets and roads in repair. As Oliver Wendell Holmes said, “taxes are the price we pay for civilized society.”