Tax return

The tax form used to file income taxes with the Internal Revenue Service (IRS).

Investopedia Says:
Individuals use Form 1040, corporations use Form 1120 and partnerships use Form 1065. Note: these are only some of the forms used for tax returns.

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General name of the form used to file taxes payable to a federal or local government. Included on the tax return are such items as gross income, allowable deductions, tax credits, and tax due. Individual taxpayers file on a calendar-year basis using Form 1040, which is due 31⁄2 months after the tax year. Corporations can file Form 1120 on a calendar-year or fiscal-year basis. It is due 21⁄2 months after the tax year. Tax returns are also prepared for partnerships (Form 1065), estates (Form 706), and gifts (Form 709).

Tax returns include all the required paperwork that accompanies the remittance of taxes to the appropriate government agency, usually the Internal Revenue Service (IRS). The IRS issues more than 650 different forms for taxpayers to use in calculating and paying their taxes (the complete list is available through IRS publication 676, Catalog of Federal Tax Forms). Each form applies to a different situation or purpose. For example, Form 1065 details the income received by a business operating as a partnership, and Form 8826 relates to expenses claimed for business use of a home. Perhaps the most familiar type of tax form is the annual personal tax return, Form 1040, that must be completed by millions of taxpayers each year.

Considering that the laws have undergone no fewer than seven major revisions in the past two decades, as well as numerous minor changes, it can be exceedingly difficult for small business owners to prepare their own tax returns. But, as Frederick W. Dailey noted in his book Tax Savvy for Small Business, "The average small business person can't afford to call a tax pro with every question." Fortunately, a great deal of information is available through other sources, such as IRS publications and help lines, self-help tax preparation guides and software, trade associations, periodicals, and online services.

It is important for small business owners to maintain a personal awareness of tax-related issues in order to save money. Even if they employ a professional bookkeeper or accountant, small business owners should keep careful tabs on their own tax preparation in order to take advantage of all possible opportunities for deductions and tax savings. "Whether or not you enlist the aid of an outsider, you should understand the basic provisions of the tax code," Albert B. Ellentuck wrote in the Laventhol and Horwath Small Business Tax Planning Guide. "Just as you would not turn over the management of your money to another person, you should not blindly allow someone else to take complete charge of your taxpaying responsibilities." In addition, as Dailey noted, "Tax knowledge has powerful profit potential. Knowing what the tax law has to offer can give you a far better bottom line than your competitors who don't bother to learn."

Common Business Tax Forms and Filing Deadlines

Small businesses that employ persons other than the owner or partners are required to withhold payroll taxes from the wages paid to employees, remit these taxes to the Internal Revenue Service (IRS), and make regularly scheduled reports to the IRS about the amount of payroll taxes owed and paid. Payroll taxes include regular income taxes, FICA (Social Security and Medicare) taxes, and FUTA (federal unemployment) taxes. In addition to withholding payroll taxes for employees, employers must remit these taxes to the IRS in a timely manner. The regular income taxes and the portion of the FICA taxes that are withheld from employees' wages each pay period must be remitted to the IRS monthly, along with a Federal Tax Deposit Coupon (Form 8109-B). If the total withheld is less than $500, however, the business is allowed to make the payments quarterly.

Employers must also file four different reports regarding payroll taxes. The first report, Form 941, is the Employer's Quarterly Federal Tax Return. This report details the number of employees the business had, the amount of wages they were paid, and the amount of taxes that were withheld for the quarter. The other three reports are filed annually. Form W-2—the Annual Statement of Taxes Withheld—must be sent to all employees before January 31 of the following year. It details how much each employee received in wages and how much was withheld for taxes over the course of the year. Copies of the W-2 forms for all employees also must be sent to the Social Security Administration. The third report, Form W-3, must be sent to the IRS by February 28 of the following year. It provides a formal reconciliation of the quarterly tax payments made on Form 941 and the annual totals reported on Form W-2 for all employees. The final report is the Federal Unemployment Tax Return, Form 940, which outlines the total FUTA taxes owed and paid for the year.

Since they do not receive an ordinary salary, the owners of sole proprietorships and partnerships are not required to withhold income taxes for themselves. Instead, they are required to estimate their total tax liability and remit it to the IRS in quarterly installments, using Form 1040 ES. It is important that the amount of tax paid in quarterly installments equal either the total amount owed during the previous year or 90 percent of their total current tax liability. Otherwise, the IRS may charge interest and impose a stiff penalty for underpayment of estimated taxes. At the end of the tax year, the income for sole proprietorships is simply reported on the personal tax return of the business owner. Partnerships must file the informational Form 1065 (Partnership Statement of Income) with the IRS, and then report the amount of income that accrued to each partner on Schedule K1.

Corporations must prepare an annual corporate tax return on either a calendar-year basis (the tax year ends December 31, and taxes must be filed by March 15) or a fiscal-year basis (the tax year ends whenever the officers determine). Most Subchapter S corporations, as well as C corporations that derive most of their income from the personal services of shareholders, are required to use the calendar-year basis for tax purposes. Most other corporations can choose whichever basis provides them with the most tax benefits. At the end of their tax year, corporations file either Form 1120, the U.S. Corporate Income Tax Return, or the shorter Form 1120A. If they expect to owe taxes, corporations are required to make quarterly estimated payments, like other businesses.

Further Reading:

Dailey, Frederick W. Tax Savvy for Small Business. 2nd ed. Berkeley, CA: Nolo Press, 1997.

DeJong, David S., and Ann Gray Jakabcin. J. K. Lasser's Year-Round Tax Strategies. New York: Macmillan, 1997.

Ellentuck, Albert B. Laventhol and Horwath Small Business Tax Planning Guide. New York: Avon Books, 1988.

The Entrepreneur Magazine Small Business Advisor. New York: Wiley, 1995.

Guttman, George. "How Simple Can a Simple Form Be?" Tax Notes. November 6, 1995.

McTague, Jim. "Tax Man or Father Time: The New Forms Are Supposed to Be Friendlier, and You Get to Stay with Them Longer." Barron's. January 2, 1995.

Rieschick, Jacqueline. "Taxpayers Will Spend Less Time on 1997 Form 1040, IRS Predicts." Tax Notes. September 22,1997.

"Top Errors Preparers Make." Journal of Accountancy. June 2000.

Wiener, Leonard. "How to Keep One Step Ahead: Hot Tips for Turning an Annual Chore into Many Happy Returns." U.S. News and World Report. March 9, 1998.

The form that the government requires a taxpayer to file with the appropriate official by a designated date to disclose and detail income subject to taxation and eligibility for deductions and exemptions, along with a remittance of the tax due or a claim for a refund of taxes that were overpaid.

The federal and state governments specify the deadlines for filing tax returns without incurring any additional interest or penalties for lateness. For most income taxpayers, the deadline of April 15 of the year following the close of the tax year for which the report is filed applies to both federal and many state returns. For persons who have made taxable gifts, the federal gift tax return is due annually on or before April 15 of the year following the tax year (as opposed to the former requirement of quarterly filing). For executors or administrators of estates that owe estate tax, a federal estate tax return must be filed within nine months of the date of death of the decedent. States may have comparable deadlines for gift and estate tax returns.

See: estate and gift taxes; income tax.

Taxation in the United States
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Tax returns in the United States are reports filed with the Internal Revenue Service (IRS) 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.

Tax returns are generally prepared using forms prescribed by the IRS or other applicable taxing authority. The forms have been described by BBC journalist Greg Wood as "a work of outstanding complexity" and having been "compiled by a cunning, but ultimately stupid, specialist in the art of torture."^[1]

Contents 1 Federal returns 1.1 Examples 1.2 Amended return 1.3 Federal income taxes 2 References 3 See also

Federal returns

Under the Internal Revenue Code returns can be classified as either tax returns or information returns, although the term "tax return" is sometimes used to describe both kinds of returns in a broad sense.

Tax returns, in the more narrow sense, are reports of tax liabilities and payments, often including financial information used to compute the tax.

In common usage, people often refer to a refund of overwithheld taxes as a "tax return." This is incorrect terminology, as it should properly be called a tax refund. The term "tax return" specifically refers to the documents filed with the IRS such as Form 1040.

Information returns are reports used to transmit information about income, receipts or other matters that may affect tax liabilities. For example, Form W-2 and Form 1099 are used to report on the amount of income that an employer, independent contractor, broker, or other payer pays to a taxpayer. A company, employer, or party which has paid income (or, in a few cases, proceeds that may ultimately be determined not to be income) to a taxpayer is required to file the applicable information return directly with the IRS. A copy of the information return is also sent directly to the payee. These procedures enable the IRS to make reasonably sure that taxpayers report income correctly.

Examples

Examples of common Federal tax returns (and, where noted, information returns) include:

Transfer taxes

Form 706, U.S. Estate Tax Return;

Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return;

Statutory excise taxes

Form 720, Quarterly Federal Excise Tax Return;

Form 2290, Heavy Vehicle Use Tax Return;

Form 5330, Return of Excise Taxes Related to Employee Benefit Plans;

Employment (payroll) taxes

Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return;

Form 941, Employer’s Quarterly Federal Tax Return;

Income taxes

Form 1040, U.S. Individual Income Tax Return;

Form 1040A, U.S. Individual Income Tax Return;

Form 1040EZ, Income Tax Return for Single and Joint Filers with No Dependents;

Form 1041, U.S. Income Tax Return for Estates and Trusts (for 1993 and prior years, this was known as “U.S. Fiduciary Income Tax Return”);

Form 1065, U.S. Return of Partnership Income (for 1999 and prior years, this was known as “U.S. Partnership Return of Income”) (information return);

Form 1099 series (various titles) (information return);

Form W-2 (information return);

Form 1120, U.S. Corporation Income Tax Return;

Form 1120S, U.S. Income Tax Return for an S Corporation;

Amended return

In the United States, taxpayers may file an amended return with the Internal Revenue Service to correct errors reported on a previous income tax return. Typically a taxpayer does not need to file an amended return if he or she has math errors as the IRS will make the necessary corrections. For individuals, amended returns are filed using Form 1040X, Amended U.S. Individual Income Tax Return.

Federal income taxes

The legal obligation to file Federal tax returns in general is imposed under 26 U.S.C. § 6011. The more specific legal obligation to file Federal income tax returns is imposed under 26 U.S.C. § 6012.

The standard U.S. individual tax return is Form 1040. There are several variations of this form, such as the 1040EZ and the 1040A, as well as many supplemental forms.

U.S. citizens and residents who realize gross income in excess of a specified amount (adjusted annually for inflation) are required by law to file Federal income tax returns (and pay remaining income taxes if applicable).

Gross income includes most kinds of income regardless of whether the income arises from legitimate businesses. Income from the sale of illegal drugs, for example, is taxable. Many criminals, such as Al Capone, are indicted not (or not only) for their non-tax crimes, but for failure to file Federal income tax returns (and pay income taxes) on their ill-gotten gains.

The IRS occasionally has seen "Fifth Amendment" returns from people who accurately report their annual income and tax liability but refuse to reveal the source of the funds on the grounds that such a statement would tend to incriminate the individual.

Many Americans find the process of filling out the tax forms more onerous than paying the taxes themselves. Many companies offer free and paid options for reducing the tedious labor involved in preparing one's tax return.

A taxpayer who finds a mistake on a previously filed individual income tax return can file corrections with Form 1040X.

References

1. ^ Wood, Greg (14 February 2009). "Taxing times for US tax payers". BBC News. http://news.bbc.co.uk/1/hi/programmes/from_our_own_correspondent/7888444.stm. Retrieved on 2009-04-10. 

See also

• Tax forms in the United States
• Taxation in the United States
• Tax preparation

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