Learn something new every day More Info... by email
Almost every government in the world levies an annual tax obligation against its citizens and residents. Some of these taxes are incidental, like sales taxes, while others must be filed with a tax return document, like property taxes and income taxes. There are two main types of income tax returns. National income tax returns remit a portion of earned income to the overarching national government, while local income tax returns do the same with respect to local governments, particularly states or provinces. Within these two categories, income tax returns can be individual, corporate, or investment-based.
Most national governments assess an income tax that claims a portion of the earnings of individual workers. Sometimes, employers are required by law to withhold a portion of workers’ income for tax purposes, but this does not usually eliminate the worker’s obligation to file an individual income tax return. Income tax returns identify how much money was owed, and how much has already been paid. If too much or too little has gone to the government, that discrepancy is usually revealed by filing a tax return.
In addition to tax on income earned as a wage, individuals must also usually declare and pay national-level taxes on any income earned from investment gains. Stock market holdings, bonds, mutual funds, and the like that have increased in value over the year must usually be accounted for on income tax returns. In most cases, any sources of income are subject to national income taxes. Preparing a tax return for a state or local government usually happens at the same time as income tax preparation at the national level.
Local governments also frequently require income tax returns, but not all do. Whether a state or locality assesses an income tax on top of any applicable national income tax is dictated by local tax law, and can vary, even within countries. Most states in the United States, for example, assess a separate state income tax that needs its own state tax return, but the tax rate varies tremendously from place to place. Some states do not have any income tax requirements.
Income tax returns are usually a bit different for individuals than they are for corporations. Any company that has made a profit over the course of the year must typically pay an income tax on those earnings. The rate of tax for corporations is where things get harder to calculate. Corporate tax rates vary by type of corporation; industry; number of employees; capital losses, gains, and expenditures; and a whole host of other deductions and considerations. While most individual income taxes are a based on fixed percentage that can be adjusted with deductions, corporate taxes typically involve a lot of calculations and adjustments on the front end.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!