What Are Individual Tax Returns, and How Do They Work?

What Is an Individual Tax Return?

An individual tax return is an official form that a person or a married couple submits to a federal, state, or local taxing agency to report all taxable income received during a specific period, usually the previous year. This record is used to assess the amount of tax that is due or was overpaid for that period. 

The Internal Revenue Service (IRS) is the federal taxing authority in the U.S. The United States has a voluntary reporting system that permits either electronic or hard-copy filing of individual tax returns. All countries have agencies that oversee national tax collection. Some tax agencies provide individual taxpayers with pre-filled individual tax returns, while others require the taxpayer to fill out and file the returns on their own.

Understanding the Individual Tax Return

The individual tax return is one of several forms used to report taxable income in the U.S. Businesses, corporations, and non-profit groups all are required to file their own variations on the individual return.

Every person who earns a certain minimum amount of income must file a tax return every year. All individual taxpayers file their returns on a version of IRS Form 1040 or 1040-SR. Married people may choose to file as individuals or as a couple.

Once complete, the taxpayer must submit the form by a deadline date. That date is usually April 15th of the year or the following weekday. Additional tax forms may be required, most commonly if the taxpayer wishes to itemize deductions rather than take the standard deduction.

Every U.S. state, even those without a state income tax, has a state taxing authority. The agency oversees the annual collection of all state taxes. Taxpayers file individual state tax returns to the state in which they reside if the state taxes income. Most state tax returns assess and calculate their taxes based on line items copied over from the federal tax return.

Individual Tax Return Forms

Form 1040 is the two-page form used by nearly all individual taxpayers. It can be used to record income from wages, salary, tips, capital gains, dividends, interest, unemployment compensation, pensions, annuities, Social Security, railroad retirement, taxable scholarships, and the Alaska Permanent Fund dividends.

The 1040-SR, an optional version for seniors, has a larger type size and gives greater prominence to tax benefits exclusively for retirees. Note that other versions of the individual tax return, including Form 1040-EZ and Form 1040-A, were retired after the 2017 tax year.

Other Forms to Report Individual Taxes

The individual tax return is not the only form that some taxpayers need to complete. Sales of stock, for example, must be reported on a Schedule D form and attached to the 1040.

Self-employed individuals and business owners are required to report and pay their taxes quarterly using Form 1040-ES. Payments due after completing Form 1040 are submitted with Form 1040-V. Taxpayers who need to amend their individual tax returns use Form 1040-X.

Philosophy Behind Individual Tax Returns

The concept of taxes as a civic duty has deep historical roots dating back to ancient civilizations where individuals contributed a portion of their resources to support communal needs. In ancient Mesopotamia, someone’s “individual tax return” may have taken the form of a cow or sheep delivered to authorities. In more modern times, taxes represent a fundamental aspect of civic responsibility. It serves as a financial commitment to bettering one’s community.

Throughout history, governments have relied on tax revenues to finance public infrastructure, education, healthcare, and various services that contribute to the overall betterment of society. Very generally speaking, individual tax returns are used to collect resources that can then be disbursed for general social welfare for things like roads, police, or parks.

Individual Tax Return Statistics

The IRS tracks a variety of information and statistics about individuals and their tax returns. The most recent information as of January 2024 was accumulated for fiscal year 2022 returns (filed by April 2023, assuming no extension was filed).

In 2022, individual income tax withheld, along with tax payments, reached a sum exceeding $2.8 trillion before factoring in refunds. In parallel, businesses contributed significantly to the tax revenue, with the IRS collecting nearly $475.9 billion in income taxes from them during the fiscal year 2022.

The landscape of tax filing witnessed a digital surge, as nearly 213.4 million returns and various forms were filed electronically, constituting a substantial 81.2% of all filings. A high degree of individuals filed their taxes electronically, as the IRS indicated 93.8% had e-filed.

In the fiscal year 2022, over 237.8 million refunds were issued to individuals. The total dollar amount of these refunds was $512.0 billion. Within this, more than 29 million tax refunds featured a refundable child tax credit and an additional 32.4 million included a refundable earned income tax credit. These numbers reflect the role of tax credits in supporting low to moderate-income individuals and families.

The Bottom Line

Individual tax returns involve the comprehensive reporting of personal financial information. This means you send your financial information to a government entity, and this information includes income, deductions, and credits. An individual tax return is used to calculate the taxes owed or the tax refund due to the taxpayer.