What Is an Individual Tax Return?

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DEFINITION
An individual tax return is a tax filing made by individuals, including married couples, as opposed to separate business entities. This generally applies to income taxes for federal and state tax returns.

An individual tax return is a tax filing made by individuals, including married couples, as opposed to separate business entities. This generally applies to income taxes for federal and state tax returns.

Learn more about what individual tax returns are and how they work.

Definition and Example of Individual Tax Returns

An individual tax return is a form that individuals fill out to report their income taxes. In this case, an “individual” ranges from single filers to those who are married filing jointly. This differs from business tax returns, which are filed by companies that are separate entities.

Sole proprietors and other types of owners of pass-through business entities, like some LLCs, would still file individual tax returns.

You would likely file an individual tax return if you are one of the following:

  • A single filer
  • Married filing jointly
  • Married filing separately
  • A head of household
  • A qualifying widow or widower

How an Individual Tax Return Works

The core of a federal individual tax return is generally IRS Form 1040. This form is used to report information such as wages to determine your taxable income and the total amount of tax owed.

Single filers and married couples need to fill out other relevant tax forms, such as any necessary Schedules. For example, if you itemize deductions, you would also include Schedule A as part of your individual tax return. There, you would specify deductions, such as for charitable contributions and home mortgage interest.

Some individuals with businesses must also include business income as part of their individual tax returns. This includes freelancers who operate a sole proprietorship and small business owners with LLCs treated as a pass-through entity. That often means filing Schedule C to report business income and expenses, all of which get filed with other individual forms as part of an individual tax return.

In comparison, if you have a business that’s taxed as a separate entity, such as a C corporation, then you would fill out a separate business tax return that’s not filed with your individual tax return.

State Taxes

When it comes to state taxes, an individual tax return often includes information similar to what’s used for a federal income tax return. However, states have their own forms and may have slightly different tax rules that affect what information is included in filings.

California allows for some moving expense deductions, so if you qualify, you would want to include that information in your state individual tax return. However, that same expense is generally not allowed as part of federal tax returns.

Individual tax returns might also be filed for certain local tax jurisdictions, though these taxes can often be paid and accounted for as part of state tax filings.

What an Individual Tax Return Means for You

Understanding what an individual tax return is can help you file your taxes accurately and figure out the best tax strategies for your situation. 

For example, if you have a side hustle or are thinking of starting your own business, you may want to consider whether or not to make that a pass-through entity. Say you decide to go this route by using the default sole proprietorship status that results from simply operating a business (including freelance and gig work). That income then becomes part of your individual tax return.

Or you might decide to create a corporation that gets taxed as its own entity. Different types of business structures can each have their advantages, so what tax return you use depends on your circumstances and preferences.

Some people may not even need to file an individual tax return. This will depend on factors like your income level, but even if you don’t have to file, you can still benefit from doing so. For example, filing an individual tax return is necessary for receiving certain tax benefits, like the earned income tax credit.

Key Takeaways

  • An individual tax return is a form you file to pay individual income taxes, including for those married filing jointly.
  • Business tax returns, which apply to businesses treated as separate entities, differ from individual tax returns.
  • For pass-through business entities, like sole proprietorships, income gets reported as part of the business owner’s individual tax return.

Article Sources

  1. IRS. "About Schedule A (Form 1040), Itemized Deductions." Accessed Jan. 3, 2022.

  2. IRS. "About Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship)." Accessed Jan 3, 2022.

  3. IRS. "Forming a Corporation." Accessed Jan. 3, 2022.

  4. California Tax Service Center. "New to California." Accessed Jan. 3, 2022.

  5. Intuit TurboTax. "IRS Form 3903: Are Moving Expenses Tax Deductible?" Accessed Jan. 3, 2022.

  6. New York City Department of Finance. "Taxes." Accessed Jan. 3, 2022.

  7. USA.gov. "Do You Need To File a Tax Return?" Accessed Jan. 3, 2022.

  8. Benefits.gov. "Earned Income Tax Credit (EITC)." Accessed Jan. 3, 2022.