Editing Taxation in the United States (section)

==Income tax==
{{Main|Income tax in the United States}}
[[File:US federal effective tax rates by income percentile and component.gif|thumb|U.S. federal effective tax rates by income percentile and component as projected for 2014 by the [[Tax Policy Center]]<ref>{{cite web|title=Effective tax rates: income, payroll, corporate and estate taxes combined|url=http://pgpf.org/Chart-Archive/0102_tax-rates|publisher=Peter G. Peterson Foundation|access-date=November 3, 2013|date=July 1, 2013}}</ref><ref>{{cite web|title=T13-0174 - Average Effective Federal Tax Rates by Filing Status; by Expanded Cash Income Percentile, 2014|url=http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3933|publisher=Tax Policy Center|access-date=November 3, 2013|date=July 25, 2013|archive-url=https://web.archive.org/web/20141211105316/http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3933|archive-date=2014-12-11|url-status=dead}}</ref>]]

Taxes based on income are imposed at the federal, most state, and some local levels within the United States. The tax systems within each jurisdiction may define taxable income separately. Many states refer to some extent to federal concepts for determining taxable income.

===History of the income tax===
The [[History of taxation in the United States#Pre-16th Amendment|first income tax in the United States]] was implemented with the [[Revenue Act of 1861]] by [[Abraham Lincoln]] during the [[Civil War (US)|Civil War]]. In 1895 the [[United States Supreme Court|Supreme Court]] ruled that the U.S. federal income tax on interest income, dividend income and rental income was [[Constitutionality|unconstitutional]] in ''[[Pollock v. Farmers' Loan & Trust Co.]]'', because it was a [[direct tax]]. The ''Pollock'' decision was overruled by the ratification of the [[Sixteenth Amendment to the United States Constitution]] in 1913,<ref>See generally Boris I. Bittker, "Constitutional Limits on the Taxing Power of the Federal Government," ''Tax Lawyer'', Vol. 41, No. 1, p. 3, American Bar Ass'n (Fall 1987); William D. Andrews, ''Basic Federal Income Taxation'', p. 2, Little, Brown and Company (3d ed. 1985); [[Calvin H. Johnson]], "The Constitutional Meaning of 'Apportionment of Direct Taxes{{'"}}, 80 Tax Notes 591 (Aug. 3, 1998); and Sheldon D. Pollack, "Origins of the Modern Income Tax, 1894–1913," 66 ''Tax Lawyer'' 295, 323–24, Winter 2013 (Amer. Bar Ass'n).</ref> and by subsequent U.S. Supreme Court decisions including ''Graves v. New York ex rel. O'Keefe,''<ref>306 U.S. 466 (1939).</ref> ''[[South Carolina v. Baker]],''<ref>485 U.S. 505 (1988).</ref> and ''[[Brushaber v. Union Pacific Railroad Co.|Brushaber v. Union Pacific Railroad Co]].''<ref>{{Cite news|url=https://supreme.justia.com/cases/federal/us/240/1/case.html|title=Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916)|work=Justia Law|access-date=2018-01-10|language=en}}</ref>

===Basic concepts===
[[File:Top Marginal State Income Tax Rate.svg|thumb|400px|Top Marginal State Income Tax Rate]]
The U.S. income tax system imposes a tax based on income on individuals, corporations, estates, and trusts.<ref>{{USC|26|1}} and {{USC|26|11}}; IRS [https://www.irs.gov/pub/irs-pdf/p17.pdf Publication 17] and [https://www.irs.gov/publications/p542/index.html Publication 542].</ref> The tax is taxable income, as defined, times a specified tax rate. This tax may be reduced by credits, some of which may be refunded if they exceed the tax calculated. Taxable income may differ from income for other purposes (such as for financial reporting). The definition of taxable income for federal purposes is used by many, but far from all states. Income and deductions are recognized under tax rules, and there are variations within the rules among the states. Book and tax income may differ. Income is divided into "capital gains", which are taxed at a lower rate and only when the taxpayer chooses to "realize" them, and "ordinary income", which is taxed at higher rates and on an annual basis. Because of this distinction, capital is taxed much more lightly than labor.

Under the U.S. system, individuals, corporations, estates, and trusts are subject to income tax. Partnerships are not taxed; rather, their partners are subject to income tax on their shares of income and deductions, and take their shares of credits. Some types of business entities may elect to be treated as corporations or as partnerships.<ref>[http://www.jct.gov/publications.html?func=startdown&id=4363 JCX-49-11, Joint Committee on Taxation], September 22, 2011, pp. 4, 50.</ref>

[[File:Federal Receipts by Source.svg|thumb|Federal receipts by source as share of total receipts (1950–2010): {{legend|#9f0f91|Individual Income Tax}}{{legend|#00ffff|Payroll Taxes}} {{legend|#157545|Corporate Income Taxes}} {{legend|#0000ff|Other Taxes}} {{legend|#ffa500|Excise Taxes}} {{legend|#f3f43f|Estate and Gift Taxes}}|left]]
Taxpayers are required to file tax returns and self assess tax. Tax may be withheld from payments of income (''e.g.'', withholding of tax from wages). To the extent taxes are not covered by withholdings, taxpayers must make estimated tax payments, generally quarterly. Tax returns are subject to review and adjustment by taxing authorities, though far fewer than all returns are reviewed.

Taxable income is [[gross income]] less exemptions, deductions, and personal exemptions. Gross income includes "all income from whatever source". Certain income, however, is subject to [[tax exemption]] at the federal or state levels. This income is reduced by [[tax deduction]]s including most business and some nonbusiness expenses. Individuals are also allowed a deduction for [[Personal exemption (United States)|personal exemptions]], a fixed dollar allowance. The allowance of some nonbusiness deductions is phased out at higher income levels.

The U.S. federal and most state income tax systems tax the worldwide income of citizens and residents.<ref>See, ''e.g.'', IRS Publication 17, p. 45.</ref> A federal [[foreign tax credit]] is granted for foreign income taxes. Individuals residing abroad may also claim the [[foreign earned income exclusion]]. Individuals may be a citizen or resident of the United States but not a resident of a state. Many states grant a similar credit for taxes paid to other states. These credits are generally limited to the amount of tax on income from foreign (or other state) sources.

===Filing status===
{{Main|Filing Status (federal income tax)}}
[[File:Historical Income Tax Rates and brackets.png|thumb|350px|right|
{{legend-line|#F23F45 solid 3px|Top [[Marginal income tax rate|marginal]] income tax rates}}
{{bulleted list |[[Tax bracket]]s}}
{{legend-line|#3CA3FA solid 3px|Lowest marginal income tax rates}}
]]

Federal and state income tax is calculated, and returns filed, for each taxpayer. Two married individuals may calculate tax and file returns jointly or separately. In addition, unmarried individuals supporting children or certain other relatives may file a return as a head of household. Parent-subsidiary groups of companies may elect to file a [[Combined reporting|consolidated return]].

There are currently five filing statuses for filing federal individual income taxes: single, married filing jointly, married filing separately, head of household, and qualifying widow(er).<ref>{{cite web|last=Internal Revenue Service|date=February 1, 2016|title=Choosing the Correct Filing Status (Tax Tip 2016-10)|url=https://www.irs.gov/newsroom/choosing-the-correct-filing-status|access-date=December 19, 2021}}</ref> The filing status used is important for determining which deductions and credits the taxpayer qualifies for. States may have different rules for determining a taxpayer's filing status, especially for people in a [[domestic partnership]].

===Graduated tax rates===
[[File:Progressive effective tax burden.pdf|thumb|right|upright=1.35|Progressive effective tax burden]]

Income tax rates differ at the federal and state levels for corporations and individuals. Federal and many state income tax rates are higher (graduated) at higher levels of income. In addition, federal and many state individual income tax rate schedules differ based on the individual's filing status. For example, the income level at which each rate starts generally is higher (''i.e.'', tax is lower) for married couples filing a joint return or single individuals filing as head of household.

Individuals are subject to federal graduated tax rates from 10% to 37%.<ref>{{USC|26|1}}; IRS [Publication 17], page 266.</ref> Corporations are subject to a 21% federal rate of tax. Prior to 2018, the effective date of the [[Tax Cuts and Jobs Act of 2017]], corporations were subject to federal graduated rates of tax from 15% to 35%; a rate of 34% applied to income from $335,000 to $15,000,000.<ref name="26 USC 11; IRS Publication 542">{{USC|26|11}}; IRS Publication 542.</ref> State income tax rates, in states which have a tax on personal incomes, vary from 1% to 16%, including local income tax where applicable. Nine states do not have a tax on ordinary personal incomes.  These include Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. {{Main|State income tax}} [[State and local tax deduction|State and local taxes]] are generally deductible in computing federal taxable income for taxpayers who itemize their deductions; however, the [[Tax Cuts and Jobs Act of 2017]] limited the maximum amount of the deduction to $10,000 for individuals and married couples from 2018 through 2025.

===Income===
{{Main|Gross income|Tax exemption#Exempt income}}
[[File:US Share of Income Taxes Paid by Income Level v1.png|thumb|upright=1.6|Share of income tax paid by level of income. The top 2.7% of taxpayers (those with income over $250,000) paid 51.6% of the federal income taxes in 2014.<ref name=Pew_1>{{cite web|url=http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/|title=High-income Americans pay most income taxes, but enough to be 'fair'?|website=Pew Center|date=April 13, 2016 |access-date=November 30, 2016}}</ref>]]

Taxable income is [[gross income]]<ref>{{USC|26|61}}; IRS Publication 17, Part II.</ref> less adjustments and allowable [[tax deduction]]s.<ref>{{USC|26|161|249}}; IRS Publication 17, [https://www.irs.gov/publications/p501/index.html Publication 501] and [https://www.irs.gov/publications/p535/index.html Publication 535].</ref> Gross income for federal and most states is receipts and gains from all sources less [[cost of goods sold]]. Gross income includes "all income from whatever source", and is not limited to cash received.  Income from illegal activities is taxable and must be reported to the [[Internal Revenue Service|IRS]].<ref>{{ussc|name=James v. United States|link=James v. United States (1961)|volume=366|page=213|pin=|year=1961}}</ref>

The amount of income recognized is generally the value received or which the taxpayer has a right to receive. Certain types of income are specifically excluded from gross income. The time at which gross income becomes taxable is determined under federal tax rules. This may differ in some cases from accounting rules.<ref>{{USC|26|446|475}}; IRS [ Publication ].</ref>

Certain types of income are excluded from gross income (and therefore subject to [[tax exemption]]).<ref>{{USC|26|101|140}}.</ref> The exclusions differ at federal and state levels. For federal income tax, interest income on state and local bonds is exempt, while few states exempt any interest income except from municipalities within that state. In addition, certain types of receipts, such as gifts and inheritances, and certain types of benefits, such as employer-provided health insurance, are excluded from income.

Foreign non-resident persons are taxed only on income from U.S. sources or from a U.S. business. Tax on foreign non-resident persons on non-business income is at 30% of the gross income, but reduced under many [[tax treaty|tax treaties]].

[[File:Irs_taxable_income.jpg|frameless|upright=3.45]]

[[File:income tax '17-'18.jpg|frameless|upright=3.45]]

These brackets are the taxable income plus the standard deduction for a joint return. That deduction is the first bracket. For example, a couple earning $88,600 by September owes $10,453; $1,865 for 10% of the income from $12,700 to $31,500, plus $8,588 for 15% of the income from $31,500 to $88,600. Now, for every $100 they earn, $25 is taxed until they reach the next bracket.

After making $400 more; going down to the 89,000 row the tax is $100 more. The next column is the tax divided by 89,000. The new law is the next column. This tax equals 10% of their income from $24,000 to $43,050 plus 12% from $43,050 to $89,000. The singles' sets of markers can be set up quickly. The brackets with its tax are cut in half.

Itemizers can figure the tax without moving the scale by taking the difference off the top. The couple above, having receipts for $22,700 in deductions, means that the last $10,000 of their income is tax free. After seven years the papers can be destroyed; if unchallenged.

'''Source and Method'''<ref>{{cite web| url = https://www.irs.gov/pub/irs-pdf/i1040gi.pdf| title = "IRS 1040 '17" p. 104"}}</ref><ref>[https://www.documentcloud.org/documents/4330092-Tax-Cuts-and-Jobs-Act-2017.html "Tax Cut and Jobs Act"].</ref>

===Deductions and exemptions===
[[File:Share of Total Income and Taxes Paid by Income Group in 2011.jpg|thumb|The share of total income and federal, state and local taxes paid by income group. Total taxes include income taxes, payroll taxes, state and local sales taxes, federal and state excise taxes, and local property taxes.<ref>{{cite news|last=Coombes |first=Andrea |url=https://www.wsj.com/articles/SB10001424052702304356604577338122267919032?mod=googlenews_wsj |title=Taxes – Who Really Is Paying Up |publisher=Online.wsj.com |date=2012-04-15 |access-date=2013-10-13}}</ref>]]
{{Main|Tax deduction}}

The U.S. system allows reduction of taxable income for both business<ref>{{USC|26|161|199}}; IRS Publication 535.</ref> and some nonbusiness<ref>{{USC|26|211|224}}; IRS Publication 17, Chapters 21–28.</ref> expenditures, called deductions. Businesses selling goods reduce gross income directly by the cost of goods sold. In addition, businesses may deduct most types of expenses incurred in the business. Some of these deductions are subject to limitations. For example, only 50% of the amount incurred for any meals or entertainment may be deducted.<ref>{{USC|26|274}}; IRS [https://www.irs.gov/publications/p463/index.html Publication 463].</ref> The amount and timing of deductions for business expenses is determined under the taxpayer's [[tax accounting]] method, which may differ from methods used in accounting records.<ref>[http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=c3b3dc02944497a4e3612aa948844ae3&rgn=div8&view=text&node=26:6.0.1.1.1.0.4.13&idno=26 IRS Regulations at 26 CFR 1. 446-1]; IRS [https://www.irs.gov/publications/p538/index.html Publication 538].</ref>

Some types of business expenses are deductible over a period of years rather than when incurred. These include the cost of long lived assets such as buildings and equipment. The cost of such assets is recovered through deductions for [[depreciation]] or [[Amortization (tax law)|amortization]].

In addition to business expenses, individuals may reduce income by an allowance for [[Personal exemption (United States)|personal exemptions]]<ref>{{USC|26|151}}; IRS [https://www.irs.gov/publications/p501/index.html Publication 501].</ref> and either a fixed [[standard deduction]] or [[itemized deduction]]s.<ref>{{USC|26|63}}; IRS Publication 501.</ref> One personal exemption is allowed per taxpayer, and additional such deductions are allowed for each child or certain other individuals supported by the taxpayer. The standard deduction amount varies by taxpayer filing status. Itemized deductions by individuals include [[Home mortgage interest deduction|home mortgage interest]], [[State and local tax deduction|state and local taxes]], certain other taxes, [[Charitable contribution deductions in the United States|contributions to recognized charities]], medical expenses in excess of 7.5% of [[adjusted gross income]], and certain other amounts.

Personal exemptions, the standard deduction, and itemized deductions are limited (phased out) above certain income levels.<ref>{{USC|26|68}}; IRS Publication 17, Chapter 29.</ref>

===Business entities===
[[File:US Effective Corporate Tax Rate 1947-2011 v2.jpg|thumb|The U.S. federal [[effective tax rate|effective]] corporate income tax rate is lower than the highest nominal rate, which can be significant in part because of [[tax shelter]]s such as [[tax haven]]s.<ref>[http://levin.senate.gov/download/repatriating-offshore-funds "Repatriating Offshore Funds"] {{Webarchive|url=https://web.archive.org/web/20141206001150/http://levin.senate.gov/download/repatriating-offshore-funds |date=2014-12-06}} ''U.S. Senate Committee on Homeland Security and Governmental Affairs, Permanent Subcommittee on Investigations'', October 11, 2011</ref><ref>[http://uspirgedfund.org/sites/pirg/files/reports/Picking_Up_the_Tab_USP.pdf "Picking Up the Tab"] ''U.S. Public Interest Research Group'', April 2012.</ref>]]
{{Main|Corporate tax in the United States|S corporations|Partnership taxation in the United States}}

Corporations must pay tax on their taxable income independently of their shareholders.<ref name="26 USC 11; IRS Publication 542"/> Shareholders are also subject to tax on dividends received from corporations.<ref>{{USCSub|26|61|a|7}}.</ref> By contrast, partnerships are not subject to income tax, but their partners calculate their taxes by including their shares of partnership items.<ref>{{USC|26|701}}; IRS [https://www.irs.gov/publications/p541/index.html Publication 541].</ref> Corporations owned entirely by U.S. citizens or residents ([[S corporation]]s) may elect to be treated similarly to partnerships. A [[limited liability company]] and certain other business entities may elect to be treated as corporations or as partnerships.<ref>[http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=c3b3dc02944497a4e3612aa948844ae3&rgn=div5&view=text&node=26:18.0.1.1.2&idno=26#26:18.0.1.1.2.20.69.2 26 CFR 301.7701-2]; IRS [https://www.irs.gov/pub/irs-pdf/f8832.pdf Form 8832].</ref> States generally follow such characterization. Many states also allow corporations to elect S corporation status. Charitable organizations are subject to tax on business income.<ref>{{USC|26|512}}; IRS [https://www.irs.gov/publications/p598/ch02.html Publication 598].</ref>

Certain transactions of business entities are not subject to tax. These include many types of formation or reorganization.<ref>{{USC|26|332|368}}; IRS Publication 542.</ref>

===Credits===
{{Main|Tax credit}}

A wide variety of tax credits may reduce income tax at the federal<ref>{{USC|26|21|54AA}}.</ref> and state levels. Some credits are available only to individuals, such as the [[Child tax credit (United States)|child tax credit]] for each dependent child, [[American Opportunity Tax Credit]]<ref>{{cite web|title=The American Opportunity Tax Credit|url=http://www.treasury.gov/resource-center/tax-policy/Documents/American-Opportunity-Tax-Credit-10-12-2010.pdf|publisher=U.S. Department of the Treasury|access-date=2012-06-26|url-status=dead|archive-url=https://web.archive.org/web/20120925100646/http://www.treasury.gov/resource-center/tax-policy/Documents/American-Opportunity-Tax-Credit-10-12-2010.pdf|archive-date=2012-09-25}}</ref> for education expenses, or the [[Earned Income Tax Credit]] for low income wage earners. Some credits, such as the Work Opportunity Tax Credit, are available to businesses, including various special industry incentives. A few credits, such as the [[foreign tax credit]], are available to all types of taxpayers.

===Payment or withholding of taxes===
{{Main|Withholding tax}}

The United States federal and state income tax systems are self-assessment systems. Taxpayers must declare and pay tax without assessment by the taxing authority. Quarterly payments of tax estimated to be due are required to the extent taxes are not paid through withholdings. The second and fourth "quarters" are not a quarter of a year in length. The second "quarter" is two months (April and May) and the fourth is four months (September to December).<ref>{{UnitedStatesCode|26|6654|6655}}; IRS [https://www.irs.gov/publications/p505/index.html Publication 505] See the section "When To Pay Estimated Tax".</ref> (Estimated taxes used to be paid based on a calendar quarter, but in the 60's the October due date was moved back to September to pull the third quarter cash receipts into the previous federal budget year which begins on October 1 every year, allowing the federal government to begin the year with a current influx of cash.) Employers must withhold income tax, as well as Social Security and Medicare taxes, from wages.<ref>{{USC|26|3102}}; {{USC|26|3402}}; IRS [https://www.irs.gov/publications/p15/index.html Publication 15].</ref> Amounts to be withheld are computed by employers based on representations of tax status by employees on [[Form W-4]], with limited government review.<ref>Contrast to, ''e.g.'', the United Kingdom system in which all withholding amounts are determined by Inland Revenue.</ref>

===State variations===
{{Main|State income tax}}
[[File:Composition of Ohio State Revenue (2007).jpg|thumb|Composition of state and local government tax revenue for sample state of Ohio, 2007<ref>Carl Davis, Kelly Davis, Matthew Gardner, Robert S. McIntyre, Jeff McLynch, Alla Sapozhnikova, [http://itepnet.org/whopays3.pdf "Who Pays? A Distributional Analysis of the Tax Systems in All 50 States"] {{Webarchive|url=https://web.archive.org/web/20120515120630/http://www.itepnet.org/whopays3.pdf |date=2012-05-15}}, Institute on Taxation & Economic Policy, Third Edition, November 2009, p. 87.</ref>]]
[[File:State income tax by type.jpg|thumb|right|Total State Government Tax Revenue By Type in 2020]]

Forty-three [[U.S. state|states]] and many localities in the U.S. impose an [[income tax]] on individuals. Forty-seven states and many localities impose a tax on the income of corporations. Tax rates vary by state and locality, and may be fixed or graduated. Most rates are the same for all types of income. State and local income taxes are imposed in addition to federal income tax. State income tax is allowed as a [[State and local tax deduction|deduction]] in computing federal income, but is capped at $10,000 per household since the passage of the [[Tax Cuts and Jobs Act of 2017|2017 tax law]]. Prior to the change, the average deduction exceeded $10,000 in most of the Midwest, most of the Northeast, as well as California and Oregon.<ref name=":0" />

State and local taxable income is determined under state law, and often is based on federal taxable income. Most states conform to many federal concepts and definitions, including defining income and business deductions and timing thereof.<ref>Hellerstein, Jerome H., and Hellerstein, Walter, ''State and Local Taxation, Cases and Materials'', Eighth Edition, 2001 (hereafter "Hellerstein"), p. 929.</ref> State rules vary widely regarding to individual itemized deductions. Most states do not allow a deduction for state income taxes for individuals or corporations, and impose tax on certain types of income exempt at the federal level.

Some states have alternative measures of taxable income, or alternative taxes, especially for corporations.

States imposing an income tax generally tax all income of corporations organized in the state and individuals residing in the state. Taxpayers from another state are subject to tax only on income earned in the state or apportioned to the state. Businesses are subject to income tax in a state only if they have sufficient nexus in (connection to) the state.

===Non-residents===
Foreign individuals and corporations not resident in the United States are subject to federal income tax only on income from a U.S. business and certain types of income from [[International taxation#Source of income|U.S. sources]].<ref>{{USC|26|871|898}}; IRS [https://www.irs.gov/publications/p515/index.html Publication 515].</ref> States tax individuals resident outside the state and corporations organized outside the state only on wages or business income within the state. Payers of some types of income to non-residents must [[Tax withholding in the United States#Withholding on payments to foreign persons|withhold]] federal or state income tax on the payment. Federal withholding of 30% on such income may be reduced under a [[tax treaty]]. Such treaties do not apply to state taxes.

===Alternative tax bases (AMT, states)===
An [[alternative minimum tax]] (AMT) is imposed at the federal level on a somewhat modified version of taxable income.<ref>{{USC|26|55|59}}; IRS [https://www.irs.gov/pub/irs-pdf/i6251.pdf Form 6251 instructions].</ref> The tax applies to individuals and corporations. The tax base is [[adjusted gross income]] reduced by a fixed deduction that varies by taxpayer filing status. Itemized deductions of individuals are limited to home mortgage interest, charitable contributions, and a portion of medical expenses. AMT is imposed at a rate of 26% or 28% for individuals and 20% for corporations, less the amount of regular tax. A credit against future regular income tax is allowed for such excess, with certain restrictions.

Many states impose minimum income taxes on corporations or a tax computed on an alternative tax base. These include taxes based on the capital of corporations and alternative measures of income for individuals. Details vary widely by state.

===Differences between book and taxable income for businesses===
In the United States, taxable income is computed under rules that differ materially from [[Generally Accepted Accounting Principles (United States)|U.S. generally accepted accounting principles]]. Since only publicly traded companies are required to prepare financial statements, many non-public companies opt to keep their financial records under tax rules. Corporations that present financial statements using other than tax rules must include a detailed reconciliation<ref>{{cite web|url=https://www.irs.gov/pub/irs-pdf/f1120sm3.pdf|title=Net Income (Loss) Reconciliation for Corporations With Total Assets of $10 Million or More|work=Schedule M-3 (Form 1120)|publisher=[[United States Department of the Treasury|Department of the Treasury]] [[Internal Revenue Service]]|date=December 2019|access-date=December 20, 2023}}</ref> of their financial statement income to their taxable income as part of their tax returns. Key areas of difference include depreciation and amortization, timing of recognition of income or deductions, assumptions for [[cost of goods sold]], and certain items (such as meals and entertainment) the tax deduction for which is limited.

===Reporting under self-assessment system===
{{Main|Tax return (United States)}}

Income taxes in the United States are self-assessed by taxpayers<ref>{{USCSub|26|6201|a|1}}; IRS [ Publication ].</ref> by filing required tax returns.<ref>{{USC|26|6011}}.</ref> Taxpayers, as well as certain non-tax-paying entities, like partnerships, must file annual [[Tax return (United States)|tax returns]] at the federal and applicable state levels. These returns disclose a complete computation of taxable income under tax principles. Taxpayers compute all income, deductions, and credits themselves, and determine the amount of tax due after applying required prepayments and taxes withheld. Federal and state tax authorities provide preprinted forms that must be used to file tax returns. IRS [[IRS tax forms#1098 series|Form 1040 series]] is required for individuals, Form [[IRS tax forms#1120_series|1120 series]] for corporations, Form [[IRS tax forms#Entity_returns|1065]] for partnerships, and Form [[IRS tax forms#990|990 series]] for tax exempt organizations.

The state forms vary widely, and rarely correspond to federal forms. Tax returns vary from the two-page (Form 1040EZ)<ref>{{cite web | url=https://www.irs.gov/pub/irs-pdf/f1040ez.pdf | title=About Form 1040-EZ, Income Tax Return for Single and Joint Filers with No Dependents &#124; Internal Revenue Service }}</ref>  used by nearly 70% of individual filers to thousands of pages of forms and attachments for large entities. Groups of corporations may elect to file [[Combined reporting#United States consolidated returns|consolidated returns]] at the federal level and with a few states. Electronic filing of federal<ref>{{Cite web |url=https://www.irs.gov/efile/index.html |title=Information for e-file |access-date=2017-08-10 |archive-date=2012-08-29 |archive-url=https://web.archive.org/web/20120829121841/http://www.irs.gov/efile/index.html |url-status=dead }}</ref> and many state returns is widely encouraged and in some cases required, and many vendors offer computer software for use by taxpayers and paid return preparers to prepare and electronically file returns.