A tax return reports income and earnings to the Internal Revenue Service (IRS). Filing one allows taxpayers to claim various deductions to reduce their taxable income to the lowest amount possible.
Both individuals and businesses are subject to federal income taxes, but not everyone must file a tax return, and not every state charges income tax. If you don’t file a tax return though, you may miss out on a tax refund—even if you had no income.
Learn what a tax return is, how it works, and how it can impact your tax refund.
Definition and Examples of Tax Returns
The word “return” is an indication that something is being reported to the IRS, and it covers a wide range of information. Information returns are filed by payers to report various earnings paid to an individual or business, such as Forms W-2 and 1099. Individuals, businesses, estates, trusts, and taxpayers age 65 or older all have their own tax returns for reporting this income and claiming deductions and credits.
Form 1040 is the tax return designated for individuals whether they’re married or not. Older taxpayers can use this one as well, as of January 2020; they’re not obligated to use Form 1040-SR.
You might find that you have to attach additional forms, known as "schedules," to your Form 1040 tax return if your sources of income or claimed deductions are other than very basic. Examples of this kind of income include gambling winnings or unemployment compensation. Some forms are lettered schedules, such as Schedule A, which is used for itemizing deductions. As of tax year 2020, there are three numbered schedules that are available for your 2021 filing as well:
- Schedule 1: Lists additional sources of income other than wages, salaries, or self-employment income, as well as any above-the-line deductions to income you’re claiming.
- Schedule 2: Reports any other taxes you might owe, in addition to income taxes, such as the alternative minimum tax or self-employment tax.
- Schedule 3: Lets you claim any tax credits that don’t have their own dedicated lines or boxes on Form 1040.
How Does a Tax Return Work?
Form 1040 calculates the amount you personally owe in income tax, taking various factors into consideration. Your total tax owed will depend on your filing status and how much you’ve already paid to the IRS during the tax year. Employed individuals have income taxes withheld from their paychecks, and their employers forward that money to the government on their behalf. Self-employed individuals—those who are the sole proprietor of a business or are freelance workers—are required to make estimated quarterly tax payments throughout the year as they bring in earnings.
Withholding and estimated tax payments are reported on Form 1040, so you would only owe additional income tax on any tax obligation that remains outstanding after these payments are subtracted.
Form 1040 can be filed electronically with the IRS, or you can mail in a paper copy.
Do I Need To File a Tax Return?
Not everyone is required to file a tax return. It’s only required if you earned more than the standard deduction for your filing status or if you owe some other type of tax, such as the alternative minimum tax. For example, when filing your taxes for tax year 2021 in 2022, the standard deduction for a single filer under age 65 is $12,550. You would not have to file a tax return if you earned that amount or less in 2021. Here’s how it breaks down for all filing statuses for tax year 2021:
- Single: $12,550
- Head of household: $18,800
- Married filing jointly: $25,100
- Qualifying widow(er): $25,100
The standard deduction rule doesn’t apply to married taxpayers who file separate tax returns. They must file a Form 1040 if they have just $5 in income. For example, if you and your spouse did not live together at the end of 2021, and your gross income was even just $6, you must file a return, regardless of age. Separate rules apply for taxpayers who can be claimed by another taxpayer as a dependent, as well.
Unmarried taxpayers who are age 65 or older are entitled to an additional $1,700 standard deduction, raising the threshold for having to file a return. If one spouse is over age 65, and they file a joint return, they get an additional $1,450. This increases to $2,700 if they’re both over age 65. Qualifying widow(er)s also get an additional $1,350.
The IRS provides an interactive tool on its website to help you determine whether you must file a return. It takes just a little longer than 10 minutes to complete.
You might want to file a tax return even if you don’t have to, as doing so may result in a tax refund, such as if you overpaid through withholding or estimated tax payments. You might also want to file if you qualify for the Earned Income Tax Credit, which would likely also result in a refund.
If you didn’t receive any economic stimulus payments in 2020, but were eligible for them, filing a tax return in 2021 provides you with an opportunity to claim that money via the Recovery Rebate Tax Credit.
Sections of a Tax Return
The Form 1040 tax return consists of 38 lines covering two pages. They’re bracketed between a section at the top for your identifying information—the filing status you’re using, as well as your name, address, and Social Security number—and a signature area at the end.
Lines 1 through 15 calculate your taxable income, and each one is labeled. For example, line 1 is for “wages, salaries, tips, etc.” This information would all have been reported to the IRS by your employer on Form W-2.
Other lines and boxes are set aside for things like taxable interest or Social Security benefits you might have received. You’d complete and submit Schedule D with your return if you had capital gains or losses during the year, and transfer this amount to line 7. You’d complete the first part of Schedule 1 and submit it with your tax return if you had any sources of income that don’t have their own lines.
Starting on line 10 of Form 1040, you get to begin subtracting from the total of these income sources, so you only have to pay taxes on the balance.
Line 10 specifically reports your adjustments to income—those above-the-line tax breaks that are so advantageous because you get to claim them in addition to itemizing your other deductions or claiming the standard deduction. You’ll calculate these in part two of Schedule 1 and transfer the total to line 10a.
Line 10b allows you to claim up to $300 for cash contributions you made to a qualifying charity during the coronavirus pandemic. Normally, you would have to itemize to claim a tax deduction for charitable contributions, but you can claim them here as an adjustment to income and claim the standard deduction as well for tax year 2021.
On line 10c, you’ll add lines 10a and 10b together to get your total adjustments to income. Subtract that result from line 9 to get your adjusted gross income, which you write on line 11.
The charitable contribution adjustment to income is unique to the 2020 and 2021 Form 1040 tax returns, meaning it is only available for those tax years.
You can claim the standard deduction or enter the total of your itemized deductions on line 12. Your taxable income appears on line 15 after you’ve made all of these subtractions.
Tax Credits and Taxes Paid
Page 2 of Form 1040 calculates the tax you owe on your taxable income. This is where the amount that has already been withheld from your paycheck, as well as any estimated tax payments you made during the year, will be recorded and subtracted. Certain refundable tax credits can be deducted here as well, because they act just like payments made.
Nonrefundable tax credits are entered on Schedule 3, and the total from line 13 on that schedule is transferred to line 31 of your Form 1040.
Tax Return vs. Tax Refund
Your tax return is a calculation of what you owe the IRS—or what the IRS owes you. Your tax refund is a payment made to you by the IRS because you overpaid over the course of the year or were eligible for one or more refundable tax credits. You’ll receive a tax refund if the amount on line 33 of Form 1040 is greater than the total tax you owe on line 24. You’ll have to make a tax payment to the IRS if line 24 is more than what appears on line 33.
For example, suppose you are an unmarried individual who falls into the single filing status, and you work for an employer. Your gross income before any deductions was $35,000 for 2021. You had $3,500 withheld from your paychecks throughout the course of the year. If you had no adjustments to your income and only took the standard deduction of $12,550, your taxable income would be $22,450. Based on this taxable income, your taxes owed would be $3,570, but since you already paid $3,500 in taxes throughout the year, you would owe just $70 and would not get a tax refund.
However, if everything were the same, but you had $4,000 withheld from your paychecks throughout the year for taxes, you’d get a tax refund of $430 from the IRS.
- Your tax return, along with applicable schedules, reports all of your sources of income for the year to the IRS.
- Your Form 1040 tax return also incorporates taxes you’ve already paid through paycheck withholding or estimated tax payments.
- The tax return you file to the IRS incorporates any refundable tax credits and deductions you’re eligible to claim in order to calculate the amount of your taxable income.
- You’ll receive a tax refund if you overpaid taxes to the IRS during the previous tax year.