What is a tax return?

1 min readLast updated October 20, 2023by Rachel Carey

Discover the most important information that will help you understand tax returns.

Filing your tax returns can feel challenging without a solid understanding of the process. However, learning the fundamentals can be beneficial, helping you to break down exactly what’s needed and how you can best prepare yourself each year.

Summary

  • A tax return is a form, or series of forms, that shows your adjusted gross income, expenses, and other financial details.

  • You calculate your tax liability and establish whether you have paid too much, too little, or enough taxes for the year.

  • If you have overpaid taxes, you will be issued with a tax refund.

  • Most taxpayers must file tax returns with the federal government and their state government since most states require their residents to pay income tax.

  • The tax return process can vary from person to person, but the best place to start is compiling the necessary forms before choosing the service and software to use.

What are tax returns?

You must complete a tax return each year if you earn over a certain amount. A tax return is a form, or series of forms, that shows your adjusted gross income, expenses, and other financial details. In other words, it shows you how much you earned, how much you've spent and your tax information.

With this information, you can calculate your tax liability and establish whether you have paid enough taxes for the year — or, conversely, if you have paid too much and are entitled to a tax refund.

Depending on your working situation, you’ll likely be able to get most of the details you need for your tax return through a W-2 statement. However, you may alternatively have a 1099 or another form to record your income.

Each year, you have to file your state and federal tax returns. This is generally by the end of April 15 — known nationwide as Tax Day.

What is the difference between a tax return and a tax refund?

It’s important not to get tax returns and tax refunds conflated. For example, just because you have filed a tax return doesn’t automatically mean you’ll receive a tax refund.

If you have submitted a tax return demonstrating you have paid too much tax, the US Treasury will issue you a tax refund.

The tax refund you receive from the government is a reimbursement for any money you have overpaid toward tax. You can expect a lump sum back if you are owed a tax refund, which will take about three weeks to be mailed to you.

How do tax returns work?

It’s one thing to understand what a tax return means. But what about the process itself and how it works?

Whatever your working situation — whether you’re a salaried or hourly employee, a freelancer, or a contractor — you’ll need to file your taxes with an IRS Form 1040. With this, you can submit your income and tax deductions. Your income can include any of the following:

  • Wages

  • Salary

  • Tips

  • Dividends

  • Business income

  • Individual retirement account (IRA)

  • Capital gains

  • Social Security benefits

It’s important to note that your 401(k) contributions are not included as taxable income.

There are ways that you can lower your yearly taxable income.

Deductions such as student loan interest or payments you’ve made throughout the year to an IRA will be subtracted from your yearly gross income, creating an adjusted gross income. It is this income that you’ll need to pay your taxes on.

Most taxpayers must file tax returns with the federal government and their state government since most states require their residents to pay income tax. However, some states do not charge income tax at all.

Federal tax is what you owe the Federal Government. The most common of these is federal income tax, which is subtracted from your paycheck throughout the year via your employer. However, this will not be the case if you are self-employed. If this is the case, you must make tax payments each quarter in the form of estimated tax payments—usually due on April, June, September, and January 15 of each tax year.

Understanding your tax bracket is the key to estimating your taxes as a self-employed worker. Of course, this can differ depending on your marital status and income. The chart below shows the marginal tax rates in the US across the seven tax brackets for taxes due in April 2023.

Tax RateSingleMarried Filing JointlyMarried Filing SeparatelyHead of Household
10 percent $0 – $10,275 $0 – $20,550 $0 – $10,275 $0 – $14,650
12 percent $10,276 – $41,775 $20,551 – $83,550 $10,276 – $41,775 $14,651 – $55,900
22 percent $41,776 – $89,075 $83,551 – $178,150 $41,776 – $89,075 $55,901 – $89,050
24 percent $89,076 – $170,050 $178,151 – $340,100 $89,076 – $170,050 $89,051 – $170,050
32 percent $170,051 – $215,950 $340,101 – $431,900 $170,051 – $215,950 $170,051 – $215,950
35 percent $215,951 – $539,900 $431,901 – $647,850 $215,951 – $323,925 $215,951 – $539,900
37 percent $539,901 and higher $647,851 and higher $323,926 and higher $539,901 and higher

How do I file my tax return?

Meanwhile, state tax returns are dependent on where you live. Those states requiring residents to file state tax returns may impose a flat tax, where all incomes are taxed at the same rate, or a progressive tax, where higher earners are charged at higher rates.

So, now you know the definition of tax returns and how they work. But what about actually filing your tax returns?

The process can vary from person to person, depending on age, filing status, income, and other factors. But for everyone, the best place to start is compiling the necessary forms before choosing the service and software to use. The basic information and forms you’ll need may include the following:

  • Social Security number

  • Tax ID number

  • The date of birth for everyone on your return (i.e., spouse or dependents)

  • Income

  • Investment information

  • Bank account information (showing interest earned on savings)

  • Form 5498 (if you made contributions to an IRA)

  • Form 10980-E (if you are paying back student loans)

  • 1099 forms (if you are self-employed)

Once you’ve gathered the information, you’ll need to establish your tax return filing status—one of the following options:

  • Single: Filing as a single taxpayer.

  • Married filing jointly: Filing with your spouse is a route most married couples take.

  • Married filing separately: Both partners file individually.

  • Head of households: Filing as an adult with qualifying dependents, covering more than half the cost of supporting dependents while unmarried.

Finally, you’ll need to identify tax deductions and tax credits. Deductions can reduce your taxable income, while credits are subtracted from your total tax bill—so both can benefit your tax return.

Deductions can come from things like interest on a mortgage or student loans and charitable donations. Credits could come in the form of child tax credit, whereby working families who make up to $150,000 as a couple (or $112,500 as a single parent) can receive $3,000 per child aged three to 17.

Once you’ve undertaken all these steps, you can submit your return digitally or by mail.

Speak to a financial advisor

The more you understand tax returns — how they work and the importance of filing them in good time — the easier the process will be for you. Rather than scrambling to get your documents together before Tax Day, you can feel comfortable tackling it with minimal issues.

If you need help with your taxes or managing your broader finances, it’s best to seek out expert advice. Find a trusted financial advisor with Unbiased and get support when you need it most. Find your advisor here.

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.