Tax return

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German tax forms

A tax return is the completion of documentation that calculates an entity’s or individual's income earned with the amount of tax payable to the government, government organizations or to potential taxpayers.[1]

Specific tax forms are intended to be used by taxpayers, or private entities that are required to report information on the tax liabilities together with income earners, businesses and companies.[2] Tax revenue is used by governments to grant sums of money to communities, including military, education, hospitals and infrastructure.[1]

In the United States the federal tax laws are administered by the Internal Revenue Service (IRS).[3] It is a government entity that fulfills three main functions. Firstly, it processes tax returns. Secondly, it provides services for taxpayers. Thirdly, it enforces the tax laws enacted by Congress. Furthermore, IRS also investigates financial crimes and oversees tax-exempt organizations.[4]

Citizens in Sweden, Denmark, Finland, and Iceland pay the highest taxes. Aside from the Nordic countries, Austria, the Netherlands and Belgium also have high taxes.[5] In contrast to those countries stand Saudi Arabia, Brunei, Monaco, the Cayman Islands, Bahamas, and Andorra which are so-called tax havens. Here the income taxes are either very low or do not exist at all.[6]

Filling in the tax return[edit]

Whether you have to fill in a tax return depends on several parameters, which are different in each country. Generally, you do not need to file a tax return if your income does not exceed a certain amount of money, but other factors such as the type of income, age and filling status also play a role. Sometimes there may be situations where you do not have to fill in the tax return, but you will do so anyway because you will receive a tax refund from the state.[7]

Beware, people often confuse these two terms. But, actually, tax refund is a term that stands for money you have paid to the state in excess of your income tax, in contrast to tax return which is a form you need to fill in every year in order to report your income, expenses and other relevant information. Tax return, therefore, helps you to deal with your tax calculation and then tax payments or tax refund depending on whether you overpaid on your taxes or were in arrears.[8]

The difficulty of filling in a tax return varies from country to country, but governments try to help citizens in different ways. Implementation of electronic filling and payment systems is considered to be the most significant improvement over the years. Recently, great progress has been made for example in Eastern Europe or China, mainly due to digitization. China has introduced for instance a hotline and department for taxpayer services or mobile tax application. Another notable improvement was also the fact that government bodies now share the data among each other. Very effective were also consolidation of taxes or reduction of profit rates.[9]

The length of the completion of tax return depends on the country, but the world average is almost 232 hours.[10]

The three parts of a tax return[edit]

Income: This part consists of all the sources of your revenue. Most widely known method for detailing is a form W-2, obtained from your employer. Wages, salaries, dividends, interest should likewise be considered as a source of revenue.[11]

Deductions: Reasoning or deductions decline in tax debt. For organizations, most expenses specifically identified with business tasks are deductible. Citizens may separate conclusions or utilize the standard derivation for their documenting situation. When the reduction of all outcomes is finished, the citizen may decide their expense rate on their balanced gross salary.

Tax credits: Tax Credits are beneficial incentives to the tax payers. Tax credits reduce the amount of liability paid to the government entaties. Tax credits are more impactful than deductions, because they directly reduce the amount of money owed. If you have $500 in tax credits, and your tax owed is $500, the tax credits will reduce your liability to 0. Tax credits arise from multiple areas. For example, you receive a Child Tax Credit if you cared for a child under 13. If you have qualified educational expenses, you might qualify under American Opportunity Tax Credit.[12]

See also[edit]


  1. ^ a b Commission, c=au;o=Australian Government;ou=Australian Government Australian Securities & Investments (2018-06-21). "Your first tax return | ASIC's MoneySmart". Retrieved 2018-08-22.
  2. ^ Office, Australian Taxation. "Income tax return". Retrieved 2018-08-22.
  3. ^ "About IRS | Internal Revenue Service". Retrieved 2021-03-28.
  4. ^ "What does the IRS do and how can it be improved?". Tax Policy Center. Retrieved 2021-03-28.
  5. ^ "Which countries tax their citizens the most?". World Economic Forum. Retrieved 2021-03-27.
  6. ^ "11 lowest income tax countries in the world right now". The CEO Magazine. Retrieved 2021-03-27.
  7. ^ Tax, TurboTax-Taxes, Income. "Does Everyone Need to File an Income Tax Return?". Retrieved 2021-03-28.
  8. ^ "What Is a Tax Refund and Why Do You Get One?". SmartAsset. 2021-01-22. Retrieved 2021-03-28.
  9. ^ "How are countries making it easier to pay taxes?". Retrieved 2021-03-27.
  10. ^ "Time to prepare and pay taxes (hours) | Data". Retrieved 2021-03-27.
  11. ^ "Policy Basics: Where Do Federal Tax Revenues Come From?". Center on Budget and Policy Priorities. 20 August 2012.
  12. ^, Jennifer Woods, special to (11 April 2016). "The top 10 tax credits that should be on your radar". CNBC.