Money Government Forms Amount Business Person Tax Individual

In the United States, each person is responsible for paying his or her own taxes. When people begin working for a company, they complete a "W-4 form," a federal (national) government document that asks for personal information. The W-4 determines how much money the company should "withhold" or not pay to the employee so that that money can be paid to the government for taxes. These "withholdings" are "deducted" (subtracted) from the employee's "wages" (the money that an employee earns). The company collects these "withholdings" throughout the year and sends the money to the state and federal governments.

In early January each year, employers mail a W-2 form to their employees. These forms show how much money was withheld during the year. People use these W-2 forms to "file" or fill out and submit their tax forms by April 15 each year. If the total amount of taxes is more than the amount of the "employee withholdings," that person needs to write a check to the U.S. government to pay for what they still owe. If the total amount of taxes is less than the amount that was withheld, then the U.S. government owes that person a "tax refund" and sends a check to the individual in late spring.

If tax forms are filled out incorrectly or if they are submitted late, there are large "fines" or money that must be paid to the government as punishment. The IRS audits individual tax filings to look for these kinds of errors, so it is important for individuals to keep their receipts and other tax-related documents in case the IRS has questions or finds a problem.

Many people are able to file their own taxes, but sometimes the forms are very complicated if, for example, an individual owns his or her own business or has many "foreign investments" (money in businesses in other countries). In these cases, individuals sometimes hire accountants to file their taxes for them.