Reports filed with the Internal Revenue Service (IRS) or with the state or local tax collection agency (California Franchise Tax Board, for example) contain information used to calculate income tax or other taxes. Tax returns are generally prepared using forms prescribed by the IRS or other applicable taxing authorities.
In 2014 taxes and healthcare became complexly intertwined in the United States due to provisions of the Affordable Care Act that implemented a system of government subsidies (in the form of tax credits) for many individuals to purchase private health insurance.
History 2014 To help lower-income families and individuals pay for coverage, the United States government started offering financial support in the form of subsidies, to offset the cost of monthly healthcare insurance premiums and out-of-pocket costs. Premium tax credits are available, depending on 2015 household size and income, and insurance status should be reported when filing a tax return.
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. A very common federal tax form is IRS Form 1040.
In 2014 taxes and healthcare became complexly intertwined in the United States due to provisions of the Affordable Care Act that implemented a system of government subsidies (in the form of tax credits) for many individuals to purchase private health insurance.
History 2014 To help lower-income families and individuals pay for coverage, the United States government started offering financial support in the form of subsidies, to offset the cost of monthly healthcare insurance premiums and out-of-pocket costs. Premium tax credits are available, depending on 2015 household size and income, and insurance status should be reported when filing a tax return.
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. A very common federal tax form is IRS Form 1040.
A tax return provides information so that the taxation authority can check on the taxpayer's calculations, or can determine the amount of tax owed if the taxpayer is not required to calculate that amount. In contrast, an information return is a declaration by some person, such as a third party, providing economic information about one or more potential taxpayers.
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.
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.
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 1040-X, Amended U.S. Individual Income Tax Return.
Federal income taxes The IRS has the power to require people to file Federal tax returns under 26 U.S.C. § 6011. Persons required to file Federal income tax are identified by 26 U.S.C. § 6012. People who receive more than the statutory minimum amount of gross income must file.
The standard U.S. individual tax return is Form 1040. There are several variations of this form, such as the 1040 E.Z and the 1040 A, as well as many supplemental forms.
U.S. citizens and residents who realize gross income over 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 income.
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 because 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 1040-X.
Deadline The annual deadline to file one's Federal individual income tax return is April 15. The IRS lists scenarios for which Tax Day does not follow this standard deadline.
Federal income taxes The IRS has the power to require people to file Federal tax returns under 26 U.S.C. § 6011. Persons required to file Federal income tax are identified by 26 U.S.C. § 6012. People who receive more than the statutory minimum amount of gross income must file.
The standard U.S. individual tax return is Form 1040. There are several variations of this form, such as the 1040 E.Z and the 1040 A, as well as many supplemental forms.
U.S. citizens and residents who realize gross income over 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 income.
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 because 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 1040-X.
Deadline The annual deadline to file one's Federal individual income tax return is April 15. The IRS lists scenarios for which Tax Day does not follow this standard deadline.
1. A return that is mailed to the IRS is timely filed if it is delivered on or before its due date, that is April 15. A return with a U.S. postmark, which is delivered after its due date, is considered timely filed if: - the date of the postmark is no later than the due date; - the return was properly addressed; - the return had proper postage. The timely filing, timely mailing rule requires that the return be postmarked within the prescribed filing period. Thus, an individual return postmarked April 16 and received on April 20 is considered filed on April 20.
2. A return delivered by a designated private carrier is timely if the carrier marks or records the return no later than the due date of the return. The IRS can designate a private carrier if the carrier: - is available to the general public; - is as timely and reliable as U.S. first class mail; - records the date on which the package was given to it for delivery; - satisfies other conditions. The IRS has identified DHL Express, Federal Express, and United Parcel Service as designated carriers.
3. A return delivered by other means than the U.S. mail or a designated private carrier must be delivered to the appropriate IRS office on or before its due date to be timely.
4. An electronically-filed return with a timely electronic postmark is timely filed, provided that the return is filed in the manner prescribed for electronic returns. An electronic postmark is a record of the date and time, in the taxpayer’s time zone, that an authorized electronic return transmitter receives the e-filed document on its host system.
Privacy and public disclosure Tax return laws generally prohibit disclosure of any information gathered on a state tax return. Likewise, the federal government may not (with certain exceptions) disclose tax return information without the filer's permission, and each federal agency is also limited in how it can share such information with other federal agencies.
Occasionally there have been efforts in Congress to require tax returns to be open to public inspection. For example, Senators Robert M. La Follette and George W. Norris supported such legislation, applicable to both individual and corporate returns, and public disclosure for wealthy taxpayers was required from 1923-1926. Presidential candidates have sometimes voluntarily released their tax returns.
The United States of America is a federal republic with autonomous state and local governments. Taxes are imposed in the United States at each of these levels. These include taxes on income, payroll, property, sales, capital gains, dividends, imports, estates and gifts, as well as various fees. In 2010 taxes collected by federal, state and municipal governments amounted to 24.8% of GDP. In the O.E.C.D, only Chile and Mexico taxed less as a share of GDP. The United States also has one of the most progressive tax systems in the industrialized world.
Taxes are imposed on net income of individuals and corporations by the federal, most state, and some local governments. Citizens and residents are taxed on worldwide income and allowed a credit for foreign taxes. Income subject to tax is determined under tax accounting rules, not financial accounting principles, and includes almost all income from whatever source. Most business expenses reduce taxable income, though limits apply to a few expenses. Individuals are permitted to reduce taxable income by personal allowances and certain nonbusiness expenses, including home mortgage interest, state and local taxes, charitable contributions, and medical and certain other expenses incurred above certain percentages of income. State rules for determining taxable income often differ from federal rules. Federal tax rates vary from 10% to 39.6% of taxable income. State and local tax rates vary widely by jurisdiction, from 0% to 13.30% of income, and many are graduated. State taxes are generally treated as a deductible expense for federal tax computation. In 2013, the top marginal income tax rate for a high-income California resident would be 52.9%.
The United States is one of two countries in the world that taxes its nonresident citizens on worldwide income, in the same manner and rates as residents; the other is Eritrea. The Court upheld the constitutionality of the payment of such tax in the case of Cook v. Tait, 265 U.S. 47 (1924).
Payroll taxes are imposed by the federal and all state governments. These include Social Security and Medicare taxes imposed on both employers and employees, at a combined rate of 15.3% (13.3% for 2011 and 2012). Social Security tax applies only to the first $106,800 of wages in 2009 through 2011. However, benefits are only accrued on the first $106,800 of wages. Employers must withhold income taxes on wages. An unemployment tax and certain other levies apply to employers.
Property taxes are imposed by most local governments and many special purpose authorities based on the fair market value of property. School and other authorities are often separately governed, and impose separate taxes. Property tax is generally imposed only on realty, though some jurisdictions tax some forms of business property. Property tax rules and rates vary widely with annual median rates ranging from 0.2% to 1.9% of a property's value depending on the state.
Sales taxes are imposed by most states and some localities on the price at retail sale of many goods and some services. Sales tax rates vary widely among jurisdictions, from 0% to 16%, and may vary within a jurisdiction based on the particular goods or services taxed. Sales tax is collected by the seller at the time of sale, or remitted as use tax by buyers of taxable items who did not pay sales tax.
The United States imposes tariffs or customs duties on the import of many types of goods from many jurisdictions. These tariffs or duties must be paid before the goods can be legally imported. Rates of duty vary from 0% to more than 20%, based on the particular goods and country of origin.
Estate and gift taxes are imposed by the federal and some state governments on the transfer of property inheritance, by will, or by life time donation. Similar to federal income taxes, federal estate and gift taxes are imposed on worldwide property of citizens and residents and allow a credit for foreign taxes.
2. A return delivered by a designated private carrier is timely if the carrier marks or records the return no later than the due date of the return. The IRS can designate a private carrier if the carrier: - is available to the general public; - is as timely and reliable as U.S. first class mail; - records the date on which the package was given to it for delivery; - satisfies other conditions. The IRS has identified DHL Express, Federal Express, and United Parcel Service as designated carriers.
3. A return delivered by other means than the U.S. mail or a designated private carrier must be delivered to the appropriate IRS office on or before its due date to be timely.
4. An electronically-filed return with a timely electronic postmark is timely filed, provided that the return is filed in the manner prescribed for electronic returns. An electronic postmark is a record of the date and time, in the taxpayer’s time zone, that an authorized electronic return transmitter receives the e-filed document on its host system.
Privacy and public disclosure Tax return laws generally prohibit disclosure of any information gathered on a state tax return. Likewise, the federal government may not (with certain exceptions) disclose tax return information without the filer's permission, and each federal agency is also limited in how it can share such information with other federal agencies.
Occasionally there have been efforts in Congress to require tax returns to be open to public inspection. For example, Senators Robert M. La Follette and George W. Norris supported such legislation, applicable to both individual and corporate returns, and public disclosure for wealthy taxpayers was required from 1923-1926. Presidential candidates have sometimes voluntarily released their tax returns.
The United States of America is a federal republic with autonomous state and local governments. Taxes are imposed in the United States at each of these levels. These include taxes on income, payroll, property, sales, capital gains, dividends, imports, estates and gifts, as well as various fees. In 2010 taxes collected by federal, state and municipal governments amounted to 24.8% of GDP. In the O.E.C.D, only Chile and Mexico taxed less as a share of GDP. The United States also has one of the most progressive tax systems in the industrialized world.
Taxes are imposed on net income of individuals and corporations by the federal, most state, and some local governments. Citizens and residents are taxed on worldwide income and allowed a credit for foreign taxes. Income subject to tax is determined under tax accounting rules, not financial accounting principles, and includes almost all income from whatever source. Most business expenses reduce taxable income, though limits apply to a few expenses. Individuals are permitted to reduce taxable income by personal allowances and certain nonbusiness expenses, including home mortgage interest, state and local taxes, charitable contributions, and medical and certain other expenses incurred above certain percentages of income. State rules for determining taxable income often differ from federal rules. Federal tax rates vary from 10% to 39.6% of taxable income. State and local tax rates vary widely by jurisdiction, from 0% to 13.30% of income, and many are graduated. State taxes are generally treated as a deductible expense for federal tax computation. In 2013, the top marginal income tax rate for a high-income California resident would be 52.9%.
The United States is one of two countries in the world that taxes its nonresident citizens on worldwide income, in the same manner and rates as residents; the other is Eritrea. The Court upheld the constitutionality of the payment of such tax in the case of Cook v. Tait, 265 U.S. 47 (1924).
Payroll taxes are imposed by the federal and all state governments. These include Social Security and Medicare taxes imposed on both employers and employees, at a combined rate of 15.3% (13.3% for 2011 and 2012). Social Security tax applies only to the first $106,800 of wages in 2009 through 2011. However, benefits are only accrued on the first $106,800 of wages. Employers must withhold income taxes on wages. An unemployment tax and certain other levies apply to employers.
Property taxes are imposed by most local governments and many special purpose authorities based on the fair market value of property. School and other authorities are often separately governed, and impose separate taxes. Property tax is generally imposed only on realty, though some jurisdictions tax some forms of business property. Property tax rules and rates vary widely with annual median rates ranging from 0.2% to 1.9% of a property's value depending on the state.
Sales taxes are imposed by most states and some localities on the price at retail sale of many goods and some services. Sales tax rates vary widely among jurisdictions, from 0% to 16%, and may vary within a jurisdiction based on the particular goods or services taxed. Sales tax is collected by the seller at the time of sale, or remitted as use tax by buyers of taxable items who did not pay sales tax.
The United States imposes tariffs or customs duties on the import of many types of goods from many jurisdictions. These tariffs or duties must be paid before the goods can be legally imported. Rates of duty vary from 0% to more than 20%, based on the particular goods and country of origin.
Estate and gift taxes are imposed by the federal and some state governments on the transfer of property inheritance, by will, or by life time donation. Similar to federal income taxes, federal estate and gift taxes are imposed on worldwide property of citizens and residents and allow a credit for foreign taxes.
Before 1776, the American Colonies were subject to taxation by the United Kingdom, and also imposed local taxes. Property taxes were imposed in the Colonies as early as 1634. In 1673, the UK Parliament imposed a tax on exports from the American Colonies, and with it created the first tax administration in what would become the United States. Other tariffs and taxes were imposed by Parliament. Most of the colonies and many localities adopted property taxes.
Under Article VIII of the Articles of Confederation, the United States federal government did not have the power to tax. All such power lay with the states. The United States Constitution, adopted in 1787, authorized the federal government to lay and collect taxes, but required that some types of tax revenues be given to the states in proportion to population. Tariffs were the principal federal tax through the 1800's.
By 1796, state and local governments in fourteen of the 15 states taxed land. Delaware taxed the income from property. By the American Civil War, the principle of taxation of property at a uniform rate had developed, and many of the states relied on property taxes as a major source of revenue. However, the increasing importance of intangible property, such as corporate stock, caused the states to shift to other forms of taxation in the 1900's.
Income taxes in the form of "faculty" taxes were imposed by the colonies. These combined income and property tax characteristics, and the income element persisted after 1776 in a few states. Several states adopted income taxes in 1837.[102] Wisconsin adopted a corporate and individual income tax in 1911, and was the first to administer the tax with a state tax administration.
The first federal income tax was adopted as part of the Revenue Act of 1861. The tax lapsed after the American Civil War. Subsequently enacted income taxes were held to be unconstitutional by the Supreme Court in Pollock v. Farmers' Loan & Trust Co. because they did not apportion taxes on property by state population. In 1913, the Sixteenth Amendment to the United States Constitution was ratified, permitting the federal government to levy an income tax on both property and labor.
U.S. federal government tax receipts as a percentage of GDP from 1945 to 2015 (note that 2010 to 2015 data are estimated).
The federal income tax enacted in 1913 included corporate and individual income taxes. It defined income using language from prior laws, incorporated in the Sixteenth Amendment, as "all income from whatever source derived." The tax allowed deductions for business expenses, but few non-business deductions. In 1918 the income tax law was expanded to include a foreign tax credit and more comprehensive definitions of income and deduction items. Various aspects of the present system of definitions were expanded through 1926, when U.S. law was organized as the United States Code. Income, estate, gift, and excise tax provisions, plus provisions relating to tax returns and enforcement, were codified as Title 26, also known as the Internal Revenue Code. This was reorganized and somewhat expanded in 1954, and remains in the same general form.
Federal taxes were expanded greatly during World War I. In 1921, wealthy industrialist and then Treasury Secretary Andrew Mellon engineered a series of significant income tax cuts under three presidents. Mellon argued that tax cuts would spur growth. The last such cut in 1928 was followed by the Great Depression in 1929. Taxes were raised again in the latter part of the Depression, and during World War II. Income tax rates were reduced significantly during the Johnson, Nixon, and Reagan Presidencies. Significant tax cuts for corporations and upper income individuals were enacted during the second Bush Presidency.
In 1986, Congress adopted, with little modification, a major expansion of the income tax portion of the Internal Revenue Code proposed in 1985 by the U.S. Treasury Department under President Reagan. The thousand page Tax Reform Act of 1986 significantly lowered tax rates, adopted sweeping expansions of international rules, eliminated the lower individual tax rate for capital gains, added significant inventory accounting rules, and made substantial other expansions of the law.
Federal income tax rates have been modified frequently. Tax rates were changed in 34 of the 97 years between 1913 and 2010. The rate structure has been graduated since the 1913 act.
Total tax revenue (not adjusted for inflation) for the U.S. federal government from 1980 to 2009 compared to the amount of revenue coming from individual income taxes.
The first individual income tax return Form 1040 under the 1913 law was four pages long. In 1915, some Congressmen complained about the complexity of the form. In 1921, Congress considered but did not enact replacement of the income tax with a national sales tax.
By the 1920's, many states had adopted income taxes on individuals and corporations. Many of the state taxes were simply based on the federal definitions. The states generally taxed residents on all of their income, including income earned in other states, as well as income of nonresidents earned in the state. This led to a long line of Supreme Court cases limiting the ability of states to tax income of nonresidents.
The states had also come to rely heavily on retail sales taxes. However, as of the beginning of World War II, only two cities (New York and New Orleans) had local sales taxes.
The Federal Estate Tax was introduced in 1916, and Gift Tax in 1924. Unlike many inheritance taxes, the Gift and Estate taxes were imposed on the transferor rather than the recipient. Many states adopted either inheritance taxes or estate and gift taxes, often computed as the amount allowed as a deduction for federal purposes. These taxes remained under 1% of government revenues through the 1990's.
All governments within the United States provide tax exemption for some income, property, or persons. These exemptions have their roots both in tax theory, federal and state legislative history, and the United States Constitution.
Under Article VIII of the Articles of Confederation, the United States federal government did not have the power to tax. All such power lay with the states. The United States Constitution, adopted in 1787, authorized the federal government to lay and collect taxes, but required that some types of tax revenues be given to the states in proportion to population. Tariffs were the principal federal tax through the 1800's.
By 1796, state and local governments in fourteen of the 15 states taxed land. Delaware taxed the income from property. By the American Civil War, the principle of taxation of property at a uniform rate had developed, and many of the states relied on property taxes as a major source of revenue. However, the increasing importance of intangible property, such as corporate stock, caused the states to shift to other forms of taxation in the 1900's.
Income taxes in the form of "faculty" taxes were imposed by the colonies. These combined income and property tax characteristics, and the income element persisted after 1776 in a few states. Several states adopted income taxes in 1837.[102] Wisconsin adopted a corporate and individual income tax in 1911, and was the first to administer the tax with a state tax administration.
The first federal income tax was adopted as part of the Revenue Act of 1861. The tax lapsed after the American Civil War. Subsequently enacted income taxes were held to be unconstitutional by the Supreme Court in Pollock v. Farmers' Loan & Trust Co. because they did not apportion taxes on property by state population. In 1913, the Sixteenth Amendment to the United States Constitution was ratified, permitting the federal government to levy an income tax on both property and labor.
U.S. federal government tax receipts as a percentage of GDP from 1945 to 2015 (note that 2010 to 2015 data are estimated).
The federal income tax enacted in 1913 included corporate and individual income taxes. It defined income using language from prior laws, incorporated in the Sixteenth Amendment, as "all income from whatever source derived." The tax allowed deductions for business expenses, but few non-business deductions. In 1918 the income tax law was expanded to include a foreign tax credit and more comprehensive definitions of income and deduction items. Various aspects of the present system of definitions were expanded through 1926, when U.S. law was organized as the United States Code. Income, estate, gift, and excise tax provisions, plus provisions relating to tax returns and enforcement, were codified as Title 26, also known as the Internal Revenue Code. This was reorganized and somewhat expanded in 1954, and remains in the same general form.
Federal taxes were expanded greatly during World War I. In 1921, wealthy industrialist and then Treasury Secretary Andrew Mellon engineered a series of significant income tax cuts under three presidents. Mellon argued that tax cuts would spur growth. The last such cut in 1928 was followed by the Great Depression in 1929. Taxes were raised again in the latter part of the Depression, and during World War II. Income tax rates were reduced significantly during the Johnson, Nixon, and Reagan Presidencies. Significant tax cuts for corporations and upper income individuals were enacted during the second Bush Presidency.
In 1986, Congress adopted, with little modification, a major expansion of the income tax portion of the Internal Revenue Code proposed in 1985 by the U.S. Treasury Department under President Reagan. The thousand page Tax Reform Act of 1986 significantly lowered tax rates, adopted sweeping expansions of international rules, eliminated the lower individual tax rate for capital gains, added significant inventory accounting rules, and made substantial other expansions of the law.
Federal income tax rates have been modified frequently. Tax rates were changed in 34 of the 97 years between 1913 and 2010. The rate structure has been graduated since the 1913 act.
Total tax revenue (not adjusted for inflation) for the U.S. federal government from 1980 to 2009 compared to the amount of revenue coming from individual income taxes.
The first individual income tax return Form 1040 under the 1913 law was four pages long. In 1915, some Congressmen complained about the complexity of the form. In 1921, Congress considered but did not enact replacement of the income tax with a national sales tax.
By the 1920's, many states had adopted income taxes on individuals and corporations. Many of the state taxes were simply based on the federal definitions. The states generally taxed residents on all of their income, including income earned in other states, as well as income of nonresidents earned in the state. This led to a long line of Supreme Court cases limiting the ability of states to tax income of nonresidents.
The states had also come to rely heavily on retail sales taxes. However, as of the beginning of World War II, only two cities (New York and New Orleans) had local sales taxes.
The Federal Estate Tax was introduced in 1916, and Gift Tax in 1924. Unlike many inheritance taxes, the Gift and Estate taxes were imposed on the transferor rather than the recipient. Many states adopted either inheritance taxes or estate and gift taxes, often computed as the amount allowed as a deduction for federal purposes. These taxes remained under 1% of government revenues through the 1990's.
All governments within the United States provide tax exemption for some income, property, or persons. These exemptions have their roots both in tax theory, federal and state legislative history, and the United States Constitution.