The Internal Revenue Service

All You Must Know About a Tax Refund

All You Must Know About a Tax Refund

Every year the IRS supplies taxpayers with billions of dollars in the form of tax refunds. The refund is awarded based on an individuals or business’s tax return and is distributed via direct deposit or paper check. Unbeknown to many, the majority of tax returns filed are met with a refund (on average over 75% annually), as oppose to a levy. 
Tax refunds awarded by the IRS offer individuals an opportunity to save their money or redistribute it for necessary items. Individual tax payers can accrue a tax refund from the IRS in a variety of ways, some of which are distributed nationally in the form of a tax credit, others which arise from a withholding of wages or write-offs.
The most common form of tax refund arises when the IRS or federal government withholds more taxes on an individuals earnings than he/she owes to the government. The federal income tax levy is based on a calendar year, however, after each pay period both federal and state governments will withhold earnings in the form of taxation. 
When the year ends, the individual taxpayer will file his/her income taxes by submitting the proper filing forms found on the IRS website, www.IRS.gov. In many instances, an individual throughout the course of a fiscal year will overpay his/her tax rate based on the levy from the pay period. When this overpayment occurs, the IRS will issue checks or a direct deposit for the overpaid balance. The amount sent from the IRS to the individual or business is known as a tax refund.
The government throughout the course of the year withholds taxes as a means to obtain an interest-free loan. To refund the principle of the loan, the government supplies a reimbursement at the end of the taxing period.
 Tax refunds allow the government to borrow interest-free from working Americans throughout the year, while offering those same individuals a form of savings that will be returned risk-free when income taxes are filed. An individual has the opportunity to control the amount of tax refund by choosing the amount of wages they wish to be withheld each tax period.
In addition to withholding income, the federal government will also award a tax refund through special exemptions or mechanisms used to boost the nation’s markets. Tax credits, depending on the economy or President in office, will vary in terms of eligibility and amount, based on year. Eligible for 2009 and 2010, The Earned Income Tax Credit is a refundable example of a tax credit, which is awarded to individuals who earn a low yearly income. 
The purpose of tax credits is to offset the burden of taxation and encourage citizens to entrust the economy through consumption or investment. The Earned Income Tax Credit is a popular example of an IRS refund that supplies individual workers with families with varying reimbursements. 
Under the EITC, an individual with one qualifying child is eligible to receive up to $3,043 a year from the IRS. Similar to the amount of dependents an individual claims on his/her tax return, tax credits such as the EITC will vary based on children present in the claimant’s family. 

Tax Collection Statistics You Need To Know

Tax Collection Statistics You Need To Know

To
get a glimpse of the enormity of the IRS and the federal government’s revenue
through taxation, one simply needs to observe the federal tax statistics in America.
Funds generated through IRS taxes are essential to fuel the public goods and
services offered by the central government. Without revenue created from the
IRS tax levy,the federal government would cripple, and America would severely
fragment. 


To appropriately review the magnitude and effectiveness of IRS taxes
one must compare and contrast the different forms of taxation and their
corresponding percentages based on varying years. The following chart will
document IRS taxes in 2007, the number of returns, the amount of gross
collection, and their relevant percentages. The chart below was taking from the
IRS website (IRS.gov), which offers infallible and detailed statistics for all
forms of IRS taxes.



Type of Return

Number of Returns

Gross Collection

Individual Income Tax

138,893,908

1,366,241,000,000

Employment Taxes

30,740,952

849,733,000,000

Corporate Income Tax

2,507,728

395,536,000,000

Excise Taxes

989,165

53,050,000,000

Estate Taxes

55,924

24,558,000,000

Gift Taxes

286,522

2,420,000,000

In 2007, there was a total of 173,351,839 separate tax returns which accounted
for $2,691,538,000,000. The 2 trillion+ dollars accumulated through the IRS tax
is allocated between various public goods and services. The government’s appropriated
numbers vary from public perception but in 2007 the following percentages were
apportioned as such:20% was given to the military for defense purposes, 33% was
spent on medicare, 8% was used to pay off our nation’s debt, 21% was given to
social security, and the following 18% was allocated for discretionary reasons.

The IRS tax, through observation of the above statistics are incredibly
exorbitant. Most don’t realize the amount of funding necessary to run a country
as large, diverse, and powerful as the United States of America. Even though
IRS taxes account for trillions of dollars of public funding each year, America
is still operating under an obscene deficit. To further elaborate on such
statistics one can observe that the Individual Income Tax is the predominant
source of revenue for the national government. 



More than 50% of revenue
acquired through IRS taxes is generated from the Individual Income Tax. This
number has steadily increased over the year due to rising wages and inflation.
To meet inflation, and the rising CPI, wages need to appropriately increase. As
a result of the progressive tax system, the more money an individual makes, the
more taxes he/she pays. 



This relationship is tangible through inspection of
year to year tax statistics. In 2006 for instance, the personal income tax
accounted for just 44% of the total gross collection from IRS taxes. That being
said, the main source of yearly revenue is always spawned through the personal
income tax. In essence, if all other revenue was combined through the various
forms (employment taxes, corporate income tax, excise taxes, estate taxes, and
gift taxes) of IRS tax levied the numbers would not equal the amount collected
from the individual income tax. 

The individual income tax levied by the IRS is the most complex and important
form of levy for the national government. The income tax category includes a
collection of funds from the four divisions of the IRS. Individuals
(investments and wages, small businesses, mid to large cap corporations, and
government entities or non-profits all contribute to the personal income tax
levy. The progressive system, places a responsibility on those individuals who
yield higher annual incomes. For example the progressive income tax breakdown
in America for 2010 is as follows:

Amount
of Annual Taxable Income

Corresponding
Tax rate

0-$8,375

10%

$8,375-$34,000

15%

$34,000-$82,400

25%

$82,400-$171,850

28%

$171,850-$373,650

33%

$373,650-above

35%


Due to the proportional relationship between tax rate and annual income, the
top tax bracket routinely accounts for 60-65% of all revenue produced through
the personal income tax. Although the numbers are prodigious the IRS estimates
that on average, $250-$300 billion dollars a year go uncollected.

The Administrative Role of the IRS

The Administrative Role of the IRS

With over 140 million annual returns in the United States the need for an organized and efficient tax collection process is paramount. The IRS which is subdivided into 4 groups (individual, small business, mid to large cap, and government entity/non profit) must ensure the delivery and obtainment of tax documents, records, and returns. 
In order to properly supply the groups with documentation, the federal IRS agent must mail corresponding tax forms to the appropriate locations. Each group requires dozens of tax forms, which solidify and organize the collection process. The tax form in essence is the levying process; taxpayers are required to fill out the designated forms to calculate and report their refund or amount owed. 
The federal IRS agent acts as the gears in the enormous IRS machine. The IRS agent performs a multitude of tasks, which include:distributes tax forms to appropriate locations and entities, seeks out tax evaders for collection purposes, offers administrative rulings, and reviews tax returns for accuracy and legitimacy.
In addition to supplying and distributing appropriate tax forms, the federal IRS agent will also offer administrative rulings. A revenue ruling is a public decision which simply applies a form of law to a certain situation. The IRS follows a tax code established by the federal government. A revenue ruling is performed by an IRS agent to simply set a precedent, or to match a statute within the coding to a particular scenario or transaction. 
The other form administrative ruling offered by a federal IRS agent is known as a private letter ruling. This form of administrative ruling is a written decision authored by the IRS in response to a taxpayers inquiry. These inquiries by nature are private matters, which legally binds only the responding IRS agent and the requesting tax payer. 
The federal IRS agent supplies information upon request to individuals or businesses who seek clarity with their tax return. The private letter ruling also keeps the taxpayer informed to any rulings, precedents, or decisions made by the IRS agent overseeing the matter.
The administrative rulings also succeed in limiting the powers of the federal IRS agent. Similar to all administrative pronouncements, taxpayers have the ability to litigate the validity of action taken by the IRS agent. In instances such as these courts can conclude a certain rule to be invalid, which determines federal IRS agent has exceeded his/her authority. 
The various IRS pronouncements are published and available for public review in the Internal Revenue Bulletin. The openness and informative nature that an IRS agent must possess enables taxpayers to rely on them, which in turn, aids in the collection process of federally issued taxes.
The administrative role of the IRS is essential to aid taxpayers with their filing processes. IRS agents issue a series of formal pronouncements called Revenue Procedures, which among other things, notify tax payers of errors made in their returns. 
Along with the notification the tax payer will be informed by the issuing IRS agent of how to correct the errors and resolve the impending issues. The procedures enforced by the IRS are not limited to taxpayers, but relevant for federal IRS agents as well. 
To ensure ethical practice the IRS has adopted the Internal Revenue Manual to outline clerical procedures involved with the processing and auditing of tax returns. The administrative role that an IRS agent must follow is excruciating in detail, and necessary to properly implement a federal tax system as large as the United States’.

How Businesses Should Handle Their Taxes

How Businesses Should Handle Their Taxes

Businesses, no matter the size, are all subject to federal taxation. Depending on the size of the company, whether it be small businesses or mid-to-large caps, the IRS will demand the appropriate filing of various forms. 
All forms associated with business taxation can be found at the IRS website. The IRS website also provides detailed instructions on how to file such forms, as well as a section which contains all IRS forms download. At the IRS website a user will be able to download the actual forms and observe how they correlate to a business’s needs. 
The form and size of the business in question will determine which taxes are levied, the appropriate amount owed, and the applicable IRS form. The IRS subdivides the types of business taxes into four distinct groups:Income tax, Self-Employment tax, Employment taxes, and Excise taxes. Each class of taxation requires the filling of different forms and is documented in detail at the IRS website. 
In addition to the varying forms and levies, the IRS has also categorized businesses into:sole proprietorship, partnerships, corporations, S corporations (pass federal tax responsibilities to shareholders), and limited liability companies. Depending on the make-up of the LLC, the company will file an individual tax return, a corporation tax return, or a partnership tax return.
For clarity’s sake we will divide the different types of taxes and list the appropriate forms used for each type of business.
Income Tax-All businesses except partnerships (files an information return) are mandated by federal law to file an income tax return. The form used depends on the type of business in question. Essentially making it a “pay-as-you-go tax”, the federal income tax must be paid as the business earns or receives income during the year. Listed below are the types of businesses and the appropriate forms used to file income tax.

Sole Proprietorship (according to the IRS website)-
         1040 US individual tax return (specifically Schedule C)
         Form 1040 (Profit or loss from Business) or Schedule C-EZ
         Form 1040-Net Profit from business
Corporations (according to the IRS website)-
         1120, U.S. Corporation Income Tax Return (IRS forms download available at IRS website)
S Corporation (according to the IRS website)-
         1120S 
         1120 Sch-K-1 (IRS forms download available at IRS website)
Self-Employment Tax-A tax levied for individuals who work for themselves. The Self-Employment tax is paid for the use of social security and Medicare. This form of tax is only relevant for a sole proprietorship or some forms of limited liability companies. An individual pays the Self-Employment tax using the 1040 form under schedule SE. The individual will owe this tax if he/she meets one of the following requirements.
         If net earnings from self-employment exceed $400.
         If work was done for a church or church-controlled organization that elected a social security or Medicare exemption.
         An individual is subject to the SE tax if he/she received $108.28 or more in wages from the church or affiliated organization.
Employment Taxes-If a company has employees they are responsible for certain tax responsibilities which must be paid and filed appropriately. Employment taxes include:social security and Medicare taxes, Federal income tax withholding, and Federal unemployment tax.
Partnerships (according to the IRS website)-
         Form 941, Employer’s Quarterly Federal Tax Return
         Form 943, Employer’s Annual Federal Tax Return (for agricultural employees)
         Form 940, Employer’s Annual Federal Unemployment Tax Return
         Form 8109-B, Federal Tax Deposit Coupon
         Individual partners in a partnership must file form 1040 Individual Income Tax Return Schedule E, Supplemental Income and Loss (All IRS forms download available at IRS website)
Corporations (according to the IRS website)-
         1120-W Estimated Tax for Corporations
         Form 941, Employer’s Quarterly Federal Tax Return
         Form 943, Employer’s Annual Federal Tax Return (for agricultural employees)
         Form 940, Employer’s Annual Federal Unemployment Tax Return
         Form 8109-B, Federal Tax Deposit Coupon (All IRS forms download available at IRS website)


S Corporations-
         Form 941
         Form 943
         Form 940
         Form 8109-B (IRS forms download available at IRS website)
Excise Taxes-The following forms are used for excise taxes and apply to certain types of corporations depending the manufacturing, sale, equipment used, and payment received of certain products.
         Form 720 (Quarterly Federal Excise Tax Return) consists of broad categories of taxes:environmental taxes, air transportation and communication taxes, fuel taxes, tax on the sale of heavy trucks, trailers, or tractors, and manufacturers taxes on the sale and use of various articles.
         Form 2290 (Heavy Highway Vehicle Use Tax) -Tax applied to businesses that use heavy trucks, buses, or trailers on public highways. The tax applies to vehicles which have a gross weight of 55,000 lbs or over.
         Form 730 (Monthly Tax Return for Wagers)-applies to businesses which accept wagers or conduct a wagering lottery.
         Form 11-C (Occupational Tax and Registration Return for Wagering)-taxes the use of various excise programs such as motor fuel.

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