What is a tax return?

A tax return is one or more forms filed to show how much a person or organization earned during a period of time and the tax owed on that amount. These returns exist to report income, expenses, deductions, and credits, along with any other information needed.

With this information, the taxpayer can determine whether they owe the government money, or whether they overpaid and the government owes them a tax refund.

Key components of a tax return

Tax returns include three main sections, which are for income, deductions, and credits.

Income

The first part includes all sources of income, for example, salary and wages. It also includes self-employment income, Social Security benefits, dividends, capital gains, pension and annuity payments, unemployment benefits, and taxable interest.

Deductions

The second part is for “above-the-line” deductions (referred to on the tax form as adjustments), which reduce the amount of income subject to tax. These can include student loan interest and money contributed to an individual retirement account or health savings account.

Taxpayers can then either itemize a list of certain expenses, meaning add them up individually and subtract them from their income, or they can take the standard deduction, which is a specific amount that can be used to lower a person’s taxable income. The standard deduction is determined based on variables like filing status and age.

Credits

The third part of a return involves tax credits, which filers can use to reduce their tax liability dollar-for-dollar. Not only can these credits lower a person’s tax bill, but they may also provide that individual with a tax refund they didn’t have before. Further, credits can make a taxpayer’s refund larger than it would be otherwise.

One common IRS credit is the earned income tax credit, which is accessible to individuals and families in certain income brackets. Taxpayers can qualify for this credit if they meet specific requirements, for example having a certain filing status and claiming a qualifying child as a dependent. It is possible to claim this credit without having a child, but additional requirements must be met. Others include the child tax credit and the child and dependent care credit.

Types of tax returns

Form 1040

An individual tax return is a form that a person can file with the relevant tax authorities such as the Internal Revenue Service or the agency in their state that is in charge of tax collections.

The most commonly used form is the IRS Form 1040. There is also Form 1040-SR, which seniors (those who are at least 65) can file. Form 1040-SR makes things a bit easier for senior filers, including offering them a standard deduction chart and larger print.

Form 1040 is, in some ways, a summary of your financial situation. It was redesigned in 2018 into a two-page form that lists your income, dependents, and tax payments. If you qualify for deductions or credits or need to report alternative income, among other things, you’ll need to complete corresponding schedules and attach them.

Here’s a list of some of the most common schedules filed with Form 1040:

• Schedule 1 (Additional income and adjustments to income)
• Schedule 2 (Alternative minimum tax and other taxes)
• Schedule 3 (Credits, including for education)
• Schedule A (Itemized deductions)
• Schedule B (Interest and ordinary dividends)
• Schedule C (Profit or loss from business, sole proprietorship)
• Schedule D (Capital gains and losses)
• Schedule EIC (Earned income tax credit)
• Schedule SE (Self-employment tax)

Other individual returns

If your state has an income tax, you may also be required to file a state tax return. Most states share a deadline with the federal government, April 15, but some states give filers until May to file.

Business tax returns

Corporate tax returns are similar to individual ones, except that they outline the profitability and expenses of businesses in order to determine what they owe for a certain time period.

These returns are made up of several schedules with information including an organization’s business type, classification number, accounting methods, balance sheets, costs of goods sold, dividends, deductions, and other key details involving profits and losses.

Businesses filing these tax returns can deduct many different expenses, including depreciation, rent, advertising, salaries, and compensation paid to officers. Filing this return requires documentation including those involving rents, gross receipts, and costs of goods sold.

Filing your tax return

Once the default method of tax filing, paper returns are becoming less and less common. The IRS processed almost 271.5 million tax returns and supplemental forms in fiscal year 2023, around 78% of which were filed electronically. More than nine in 10 individual tax returns were filed electronically.

Online tax software is offered for free to taxpayers with incomes of $79,000 or less through the IRS Free File program, which debuted in 2003. However, filers with very simple situations may still be able to find free tax preparation software through companies like H&R Block and TurboTax.

The deadline to file your annual tax return and pay any tax you owe is April 15. If you need more time, you can get a six-month tax extension by electronically filling out and submitting Form 4868, or making an online payment toward your tax bill. However, remember that while a tax extension give you more time to file, it does not extend your deadline to pay. You must still pay your taxes in full by April 15, or you’ll incur taxes and penalties.

Importance of filing a tax return

Legal obligation

For the 2024 tax year, individuals in the U.S. who have an income of at least $14,600 and have a filing status of single need to file a federal income tax return. For married couples who are filing jointly, the income requirements are higher, at $29,200. The income for those filing as the head of a household is $21,900.

Claiming refunds

The terms tax return and tax refund, sometimes confused as being synonymous, are actually quite different. A tax return is paperwork that a taxpayer files with the relevant authorities, such as their state government and the IRS, to determine tax liability.

A tax refund, in contrast, is the money you get back from the government if you paid more in taxes during a specific period than you owed.

Eligibility of benefits

Even if you aren’t required to file a tax return because your income is too low, you may still want to file to get a refund for overpayment of taxes or see if you qualify for refundable credits.

See the full IRS guidance for individual credits and deductions.