You would likely file an individual tax return if you are one of the following:
A single filerMarried filing jointlyMarried filing separatelyA head of householdA qualifying widow or widower
The core of a federal individual tax return is generally IRS Form 1040 and, in some cases, Form 1040-SR. 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 single-member LCCs, in some cases. 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.
An Example of an Individual Tax Return
Isabel is an accountant at a tax firm where she earns $80,000 a year. When it’s time to file taxes, Isabel fills out Form 1040. On the form, she provides her name, address, date of birth, and Social Security number. She then fills out various sections related to income, deductions, credit, and taxes. By the end of the form, Isabel knows whether she’ll owe taxes or receive a refund.
Individual Tax Returns and 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. 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’s 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 based on your income and filing status. 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.
