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Income Tax Returns

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Income Tax

Income tax is money collected by federal and state (and in some areas, city) governments to pay for infrastructure, such as building roads; services, such as national defense and education; and salaries of federal and state employees.

Income taxes are paid by anyone who receives compensation or earns wages, makes money by investing, has income from other financial activities (interest, capital gains, etc.), or who is collecting a fellowship or scholarship. Employers collect these taxes and send them to the proper federal and state taxing agencies every time they pay someone.

Year End Tax Filing

At the end of each calendar year, employers prepare wage and tax summary statements (W-2, 1042S) and send them to every person they made a payment to during the year. They also send a copy of these statements to the taxing agencies. Once an individual receives these forms from their employers they use this information to file federal and state income tax returns.

An income tax return is a document on which all income and tax-related information is compiled and then used to calculate the exact amount of tax an individual is responsible for paying. The amounts that have been withheld from the employee's paychecks throughout the year are an estimate. When the tax returns are complete, a person may owe additional taxes or be due a refund of over withheld taxes.

 

Last Edited: December 3rd, 2010