An income tax is a tax imposed on individuals or entities (taxpayers) that varies with the income or profits (taxable income) of the taxpayer. Details vary widely by jurisdiction. Many jurisdictions refer to income tax on business entities as companies tax or corporate tax. Partnerships generally are not taxed; rather, the partners are taxed on their share of partnership items. Tax may be imposed by both a country and subdivisions. Most jurisdictions exempt locally organized charitable organizations from tax.

Income tax generally is computed as the product of a tax rate times taxable income. The tax rate may increase as taxable income increases (referred to as graduated rates). Taxation rates may vary by type or characteristics of the taxpayer. Capital gains may be taxed at different rates than other income. Credits of various sorts may be allowed that reduce tax. Some jurisdictions impose the higher of an income tax or a tax on an alternative base or measure of income.

Taxable income of taxpayers resident in the jurisdiction is generally total income less income producing expenses and other deductions. Generally, only net gain from sale of property, including goods held for sale, is included in income. Income of a corporation's shareholders usually includes distributions of profits from the corporation. Deductions typically include all income producing or business expenses including an allowance for recovery of costs of business assets. Many jurisdictions allow notional deductions for individuals, and may allow deduction of some personal expenses. Most jurisdictions either do not tax income earned outside the jurisdiction or allow a credit for taxes paid to other jurisdictions on such income. Nonresidents are taxed only on certain types of income from sources within the jurisdictions, with few exceptions.

Most jurisdictions require self-assessment of the tax and require payers of some types of income to withhold tax from those payments. Advance payments of tax by taxpayers may be required. Taxpayers not timely paying tax owed are generally subject to significant penalties, which may include jail for individuals or revocation of an entity's legal existence.

History

The concept of taxing income is a modern innovation and presupposes several things: a money economy, reasonably accurate accounts, a common understanding of receipts, expenses and profits, and an orderly society with reliable records.

For most of the history of civilization, these preconditions did not exist, and taxes were based on other factors. Taxes on wealth, social position, and ownership of the means of production (typically land and slaves) were all common. Practices such as tithing, or an offering of first fruits, existed from ancient times, and can be regarded as a precursor of the income tax, but they lacked precision and certainly were not based on a concept of net increase.

Early examples

The first income tax is generally attributed to Egypt. In the early days of the Roman Republic, public taxes consisted of modest assessments on owned wealth and property. The tax rate under normal circumstances was 1% and sometimes would climb as high as 3% in situations such as war. These modest taxes were levied against land, homes and other real estate, slaves, animals, personal items and monetary wealth. The more a person had in property, the more tax they paid. Taxes were collected from individuals.

In the year 10 AD, Emperor Wang Mang of the Xin Dynasty instituted an unprecedented income tax, at the rate of 10 percent of profits, for professionals and skilled labor. He was overthrown 13 years later in 23 AD and earlier policies were restored during the reestablished Han Dynasty which followed.

One of the first recorded taxes on income was the Saladin tithe introduced by Henry II in 1188 to raise money for the Third Crusade. The tithe demanded that each layperson in England and Wales be taxed one tenth of their personal income and moveable property.

Modern era

The inception date of the modern income tax is typically accepted as 1799, at the suggestion of Henry Beeke, the future Dean of Bristol. This income tax was introduced into Great Britain by Prime Minister William Pitt the Younger in his budget of December 1798, to pay for weapons and equipment for the French Revolutionary War. Pitt's new graduated (progressive) income tax began at a levy of 2 old pence in the pound (1/120) on incomes over £60 (equivalent to £5,696 in 2015), and increased up to a maximum of 2 shillings in the pound (10%) on incomes of over £200. Pitt hoped that the new income tax would raise £10 million a year, but actual receipts for 1799 totalled only a little over £6 million.

Pitt's income tax was levied from 1799 to 1802, when it was abolished by Henry Addington during the Peace of Amiens. Addington had taken over as prime minister in 1801, after Pitt's resignation over Catholic Emancipation. The income tax was reintroduced by Addington in 1803 when hostilities with France recommenced, but it was again abolished in 1816, one year after the Battle of Waterloo. Opponents of the tax, who thought it should only be used to finance wars, wanted all records of the tax destroyed along with its repeal. Records were publicly burned by the Chancellor of the Exchequer, but copies were retained in the basement of the tax court.

In the United Kingdom of Great Britain and Ireland, income tax was reintroduced by Sir Robert Peel by the Income Tax Act 1842. Peel, as a Conservative, had opposed income tax in the 1841 general election, but a growing budget deficit required a new source of funds. The new income tax, based on Addington's model, was imposed on incomes above £150 (equivalent to £12,735 in 2015),. Although this measure was initially intended to be temporary, it soon became a fixture of the British taxation system.

A committee was formed in 1851 under Joseph Hume to investigate the matter, but failed to reach a clear recommendation. Despite the vociferous objection, William Gladstone, Chancellor of the Exchequer from 1852, kept the progressive income tax, and extended it to cover the costs of the Crimean War. By the 1860s, the progressive tax had become a grudgingly accepted element of the English fiscal system.

The US federal government imposed the first personal income tax, on August 5, 1861, to help pay for its war effort in the American Civil War - (3% of all incomes over US$800) (equivalent to $21,324 in 2016). This tax was repealed and replaced by another income tax in 1862. It was only in 1894 that the first peacetime income tax was passed through the Wilson-Gorman tariff. The rate was 2% on income over $4000 (equivalent to $110,723.08 in 2016), which meant fewer than 10% of households would pay any. The purpose of the income tax was to make up for revenue that would be lost by tariff reductions. The US Supreme Court ruled the income tax unconstitutional, the 10th amendment forbidding any powers not expressed in the US Constitution, and there being no power to impose any other than a direct tax by apportionment.

In 1913, the Sixteenth Amendment to the United States Constitution made the income tax a permanent fixture in the U.S. tax system. In fiscal year 1918, annual internal revenue collections for the first time passed the billion-dollar mark, rising to $5.4 billion by 1920.

Common principles

While tax rules vary widely, there are certain basic principles common to most income tax systems. Tax systems in Canada, China, Germany, Singapore, the United Kingdom, and the United States, among others, follow most of the principles outlined below. Some tax systems, such as India, may have significant differences from the principles outlined below. Most references below are examples; see specific articles by jurisdiction (e.g., Income tax in Australia).

Taxpayers and rates

Individuals are often taxed at different rates than corporations. Individuals include only human beings. Tax systems in countries other than the USA treat an entity as a corporation only if it is legally organized as a corporation. Estates and trusts are usually subject to special tax provisions. Other taxable entities are generally treated as partnerships. In the USA, many kinds of entities may elect to be treated as a corporation or a partnership. Partners of partnerships are treated as having income, deductions, and credits equal to their shares of such partnership items.

Separate taxes are assessed against each taxpayer meeting certain minimum criteria. Many systems allow married individuals to request joint assessment. Many systems allow controlled groups of locally organized corporations to be jointly assessed.

Tax rates vary widely. Some systems impose higher rates on higher amounts of income. Example: Elbonia taxes income below E.10,000 at 20% and other income at 30%. Joe has E.15,000 of income. His tax is E.3,500. Tax rates schedules may vary for individuals based on marital status.

Residents and nonresidents

Residents are generally taxed differently from nonresidents. Few jurisdictions tax nonresidents other than on specific types of income earned within the jurisdiction. See, e.g., the discussion of taxation by the United States of foreign persons. Residents, however, are generally subject to income tax on all worldwide income. A very few countries (notably Singapore and Hong Kong) tax residents only on income earned in or remitted to the country.

Residence is often defined for individuals as presence in the country for more than 183 days. Most countries base residence of entities on either place of organization or place of management and control. The United Kingdom has three levels of residence.

Defining income

Most systems define income subject to tax broadly for residents, but tax nonresidents only on specific types of income. What is included in income for individuals may differ from what is included for entities. The timing of recognizing income may differ by type of taxpayer or type of income.

Income generally includes most types of receipts that enrich the taxpayer, including compensation for services, gain from sale of goods or other property, interest, dividends, rents, royalties, annuities, pensions, and all manner of other items. Many systems exclude from income part or all of superannuation or other national retirement plan payments. Most tax systems exclude from income health care benefits provided by employers or under national insurance systems.

Deductions allowed

Nearly all income tax systems permit residents to reduce gross income by business and some other types of deductions. By contrast, nonresidents are generally subject to income tax on the gross amount of income of most types plus the net business income earned within the jurisdiction.

Expenses incurred in a trading, business, rental, or other income producing activity are generally deductible, though there may be limitations on some types of expenses or activities. Business expenses include all manner of costs for the benefit of the activity. An allowance (as a capital allowance or depreciation deduction) is nearly always allowed for recovery of costs of assets used in the activity. Rules on capital allowances vary widely, and often permit recovery of costs more quickly than ratably over the life of the asset.

Most systems allow individuals some sort of notional deductions or an amount subject to zero tax. In addition, many systems allow deduction of some types of personal expenses, such as home mortgage interest or medical expenses.

Business profits

Only net income from business activities, whether conducted by individuals or entities is taxable, with few exceptions. Many countries require business enterprises to prepare financial statements which must be audited. Tax systems in those countries often define taxable income as income per those financial statements with few, if any, adjustments. A few jurisdictions compute net income as a fixed percentage of gross revenues for some types of businesses, particularly branches of nonresidents.

Credits

Nearly all systems permit residents a credit for income taxes paid to other jurisdictions of the same sort. Thus, a credit is allowed at the national level for income taxes paid to other countries. Many income tax systems permit other credits of various sorts, and such credits are often unique to the jurisdiction.

Alternative taxes

Some jurisdictions, particularly the United States and many of its states and Switzerland, impose the higher of regular income tax or an alternative tax. Switzerland and U.S. states generally impose such tax only on corporations and base it on capital or a similar measure.

Administration

Income tax is generally collected in one of two ways: through withholding of tax at source and/or through payments directly by taxpayers. Nearly all jurisdictions require those paying employees or nonresidents to withhold income tax from such payments. The amount to be withheld is a fixed percentage where the tax itself is at a fixed rate. Alternatively, the amount to be withheld may be determined by the tax administration of the country or by the payer using formulas provided by the tax administration. Payees are generally required to provide to the payer or the government the information needed to make the determinations. Withholding for employees is often referred to as "pay as you earn" (PAYE) or "pay as you go."

Nearly all systems require those whose proper tax is not fully settled through withholding to self assess tax and make payments prior to or with final determination of the tax. Self-assessment means the taxpayer must make a computation of tax and submit it to the government.

State, provincial, and local

Income taxes are separately imposed by sub-national jurisdictions in several countries with federal systems. These include Canada, Germany, Switzerland, and the United States, where provinces, cantons, or states impose separate taxes. In a few countries, cities also impose income taxes. The system may be integrated (as in Germany) with taxes collected at the federal level. In Quebec and the United States, federal and state systems are independently administered and have differences in determination of taxable income.

Wage based taxes

Income taxes of workers are often collected by employers under a withholding or Pay-as-you-earn tax system. Such collections are not necessarily final amounts of tax, as the worker may be required to aggregate wage income with other income and/or deductions to determine actual tax. Calculation of the tax to be withheld may be done by the government or by employers based on withholding allowances or formulas.

Retirement oriented taxes, such as Social Security or national insurance, also are a type of income tax, though not generally referred to as such. These taxes generally are imposed at a fixed rate on wages or self-employment earnings up to a maximum amount per year. The tax may be imposed on the employer, the employee, or both, at the same or different rates.

Some jurisdictions also impose a tax collected from employers, to fund unemployment insurance, health care, or similar government outlays.

Economic and policy aspects

Multiple conflicting theories have been proposed regarding the economic impact of income taxes. Income taxes are widely viewed as a progressive tax (the incidence of tax increases as income increases).

Criticisms

Tax avoidance strategies and loopholes tend to emerge within income tax codes. They get created when taxpayers find legal methods to avoid paying taxes. Lawmakers then attempt to close the loopholes with additional legislation. That leads to a vicious cycle of ever more complex avoidance strategies and legislation. The vicious cycle tends to benefit large corporations and wealthy individuals that can afford the professional fees that come with ever more sophisticated tax planning, thus challenging the notion that even a marginal income tax system can be properly called progressive.

The higher costs to labour and capital imposed by income tax causes deadweight loss in an economy, being the loss of economic activity from people deciding not to invest capital or use time productively because of the burden that tax would impose on those activities. There is also a loss from individuals and professional advisors devoting time to tax-avoiding behaviour instead of economically-productive activities.

Around the world

Income taxes are used in most countries around the world. The tax systems vary greatly and can be progressive, proportional, or regressive, depending on the type of tax. Comparison of tax rates around the world is a difficult and somewhat subjective enterprise. Tax laws in most countries are extremely complex, and tax burden falls differently on different groups in each country and sub-national unit. Of course, services provided by governments in return for taxation also vary, making comparisons all the more difficult.

Countries that tax income generally use one of two systems: territorial or residential. In the territorial system, only local income â€" income from a source inside the country â€" is taxed. In the residential system, residents of the country are taxed on their worldwide (local and foreign) income, while nonresidents are taxed only on their local income. In addition, a very small number of countries, notably the United States, also tax their nonresident citizens on worldwide income.

Countries with a residential system of taxation usually allow deductions or credits for the tax that residents already pay to other countries on their foreign income. Many countries also sign tax treaties with each other to eliminate or reduce double taxation.

Countries do not necessarily use the same system of taxation for individuals and corporations. For example, France uses a residential system for individuals but a territorial system for corporations, while Singapore does the opposite, and Brunei taxes corporate but not personal income.

Transparency and public disclosure

Public disclosure of personal income tax filings occurs in Finland, Norway and Sweden (as of the late-2000s and early 2010s).

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A Taxpayer Identification Number (TIN) is an identifying number used for tax purposes in the United States. It is also known as a Tax Identification Number or Federal Taxpayer Identification Number. A TIN may be assigned by the Social Security Administration or by the Internal Revenue Service (IRS).

Section 6109(a) of the Internal Revenue Code provides (in part) that "When required by regulations prescribed by the Secretary [of the Treasury or his delegate] [ . . . ] Any person required under the authority of this title [i.e., under the Internal Revenue Code] to make a return, statement, or other document shall include in such return, statement or other document such identifying number as may be prescribed for securing proper identification of such person."

Internal Revenue Code section 6109(d) provides: “The social security account number issued to an individual for purposes of section 205(c)(2)(A) of the Social Security Act [codified as 42 U.S.C. § 405(c)(2)(A)] shall, except as shall otherwise be specified under regulations of the Secretary [of the Treasury or his delegate], be used as the identifying number for such individual for purposes of this title [the Internal Revenue Code, title 26 of the United States Code].”

A TIN may be:

• a Social Security number (SSN)
• an Individual Taxpayer Identification Number (ITIN)
• an Employer Identification Number (EIN), also known as a FEIN (Federal Employer Identification Number)
• an Adoption Taxpayer Identification Number, used as a temporary number for a child for whom the adopting parents cannot obtain an SSN
• a Preparer Tax Identification Number, used by paid preparers of U.S. tax returns

SSNs are used by individuals who have (or had) the right to work in the United States.

ITINs are used by aliens who may or may not have the right to work in the US, such as aliens on temporary visas and non-resident aliens with US income. Often people need the identification number because they have been advised by a bank that no account will be opened without a number, even if the account is being opened by a non-profit organization.

EINs are used by employers, sole proprietors, corporations, partnerships, non-profit associations, trusts, estates of decedents, government agencies, certain individuals, and other business entities.

Notes

External links

• IRS: Taxpayer Identification Numbers (TIN)

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Roseville is a city in Ramsey County, Minnesota, just north of Saint Paul and east of Minneapolis. It is one of two Twin Cities suburbs that are adjacent to both Saint Paul and Minneapolis (the other is Lauderdale). The land comprising Falcon Heights, Lauderdale, and southern Roseville was part of Saint Paul until Roseville incorporated in 1948 and Falcon Heights and Lauderdale in 1949.

Business

Roseville's property taxes are some of the lowest in the Twin Cities metropolitan area, owing in part to the extensive commercially zoned land. Several major shopping centers are in Roseville, including Rosedale Center and the Har Mar Mall. The city's per-capita retail spending is slightly higher than that of Bloomington (home of the Mall of America), and it has the greatest number of restaurants per capita in the area.

The first Target store was built in 1962 in Roseville and replaced in 2005 with a SuperTarget; Roseville is also home to the first Barnes & Noble bookstore outside New York City and the first McDonald's and Dairy Queen restaurants in the state of Minnesota. The Dairy Queen is currently on the Preservation Alliance of Minnesota's list of the 10 Most Endangered Historic Places.

Sport

Roseville is also home to the John Rose Oval, North America's largest outdoor artificial sheet of ice. The 1995 Men's Bandy World Championship and the 2006 Women's Bandy World Championship were held here. The 2016 Women's Bandy World Championship will. The United States national bandy team and its Canadian counterpart meet there for friendlies in November.

The fifth-largest board game publisher in the world, Fantasy Flight Games, is based in Roseville. Roseville Visitors Association, the Official Visitors Site for Roseville, Old Dutch Foods, the Minnesota Department of Education, and the Minnesota State Lottery are headquartered in Roseville.

Notable people

The city is the hometown of MacGyver and Stargate SG-1 star Richard Dean Anderson, WKRP in Cincinnati star Loni Anderson (no relation), and Six Feet Under, Dirty Sexy Money and Parenthood star Peter Krause. In August 2006, resident Jim Kramer won the United States Scrabble Open in Phoenix to become the National Scrabble Association (NSA) champion. Robert Bell served as Roseville City Attorney and in the Minnesota State Legislature. The late Jim Lange, a TV host, was also a resident, as was John Albers, CEO of 7 Up. David Frederickson, who has served as Commissioner of the Minnesota Department of Agriculture since 2011, and previously served as National Farmers Union is a resident. Mike Muscala, who attended Roseville Area High School, plays for the NBA's Atlanta Hawks. It is also the hometown of "Atop the Fourth Wall" host Lewis “Linkara” Lovhaug.

History

Roseville's land was originally home to the Dakota and Ojibway. The first white settlers came in 1843, and the Native Americans left the area by 1862. Rose Township was established in 1858; it was named after one of the first settlers, Isaac Rose. The township included the areas now known as Roseville, Lauderdale, and Falcon Heights, as well as parts of present-day Saint Paul and Minneapolis. The area saw rapid growth through the 1930s and 1940s, and Roseville incorporated as a village in 1948 to accommodate it. Falcon Heights and Lauderdale soon followed suit, and Rose Township ceased to exist. The first Roseville Police Chief was Ray Goneau and he held that position until 1977.

Geography

According to the United States Census Bureau, the city has a total area of 13.84 square miles (35.85 km²), of which 13.00 square miles (33.67 km²) is land and 0.84 square miles (2.18 km²) is water.

The 45th parallel crosses the city; a marker at the northeast corner of the intersection of Cleveland Avenue and Loren Road identifies the location.

Interstate Highway 35W and Minnesota Highways 36, 51 (Snelling Avenue), and 280 are the four main routes in Roseville.

Demographics

2010 census

As of the census of 2010, there were 33,660 people, 14,623 households, and 8,406 families residing in the city. The population density was 2,589.2 inhabitants per square mile (999.7/km²). There were 15,490 housing units at an average density of 1,191.5 per square mile (460.0/km²). The racial makeup of the city was 81.3% White, 6.2% African American, 0.5% Native American, 7.3% Asian American, 2.0% from other races, and 2.7% from two or more races. Hispanic or Latino of any race were 4.6% of the population.

There were 14,623 households of which 23.2% had children under the age of 18 living with them, 46.0% were married couples living together, 8.4% had a female householder with no husband present, 3.1% had a male householder with no wife present, and 42.5% were non-families. 35.3% of all households were made up of individuals and 15.4% had someone living alone who was 65 years of age or older. The average household size was 2.20 and the average family size was 2.87.

The median age in the city was 42.1 years. 18.6% of residents were under the age of 18; 10.8% were between the ages of 18 and 24; 23.7% were from 25 to 44; 26.6% were from 45 to 64; and 20.2% were 65 years of age or older. The gender makeup of the city was 47.1% male and 52.9% female.

2000 census

As of the census of 2000, there were 33,690 people, 14,598 households, and 8,598 families residing in the city. The population density was 2,543.9 people per square mile (982.5/km²). There were 14,917 housing units at an average density of 1,126.4 per square mile (435.0/km²). The racial makeup of the city was 89.49% White, 2.80% Black, 0.32% Native American, 4.89% Asian, 0.08% Pacific Islander, 0.76% from other races, and 1.65% from two or more races. Hispanic or Latino of any race were 1.97% of the population.

There were 14,598 households out of which 22.2% had children under the age of 18 living with them, 49.2% were married couples living together, 7.2% had a female householder with no husband present, and 41.1% were non-families. 33.6% of all households were made up of individuals and 13.9% had someone living alone who was 65 years of age or older. The average household size was 2.20 and the average family size was 2.82.

18.2% of residents were under the age of 18, 11.1% were between 18 and 24, 26.8% were between 25 and 44, 23.6% were between 45 and 64, and 20.3% were 65 years of age or older. The median age was 41 years. For every 100 females there were 87.0 males. For every 100 females age 18 and over, there were 84.1 males.

The median income for a household in the city was $51,056, and the median income for a family was $65,861. (These figures had risen to $51,617 and $81,300, respectively, as of 2008.) Males had a median income of $41,765, and females had a median income of $32,389. The per capita income for the city was $27,755. About 2.6% of families and 4.2% of the population were below the poverty line, including 4.5% of those under age 18 and 2.9% of those age 65 or over.

Government and infrastructure

The Minnesota Department of Education has its headquarters in Roseville.

Education

Primary and secondary

Roseville is served by the Roseville Area Schools District (ISD 623).

Roseville elementary schools include Brimhall Elementary, Central Park Elementary, Emmett D Williams Elementary, Edgerton Elementary, Falcon Heights Elementary, Little Canada Elementary, and Parkview Center School (Kâ€"8).

Roseville Area Middle School (RAMS) serves grades 7 and 8. Roseville Area High School (RAHS) serves grades 9 through 12. Richard Dean Anderson graduated from Ramsey High School, which, along with Kellogg High School, became RAHS. Fairview Alternative High School is also located in the area.

Roseville is home to Concordia Academy, a private high school affiliated with the Lutheran Churchâ€"Missouri Synod, and St. Rose of Lima, a private (preâ€"K through 8) Catholic school.

Higher education

• Minneapolis Business College
• National American University
• University of Northwestern â€" Saint Paul

Things to do

Library

• Roseville Library (at Hamline Avenue and County Road B) is the busiest library in Minnesota. It is the largest location in the Ramsey County Library system, with over 340,000 volumes in its collection, nearly three times that of any other branch in the county. It was torn down and rebuilt with larger capacity in 2010. Only the downtown Saint Paul library, with around 400,000 volumes, has more materials.

Parks and lakes

Recreation

• Cedarholm Golf Course (County Road B2 and Hamline Avenue)
• Guidant John Rose Minnesota Oval (County Road C between Hamline and Lexington Avenues)
• Rosedale Mall
• Movie Theater (AMC Rosedale 14)
• Bennett Lake

References

External links

• Roseville, MN â€" Official Website
• Roseville Visitors Association â€" VisitRoseville.com
• Roseville Parks and Recreation
• Living Smarter, Roseville, MN â€" Portal for Roseville residents with helpful tips for healthy living
• Street map from Google Maps
• Roseville Historical Society site
• Roseville and Little Canada Review â€" newspaper site
• Ramsey County Sun Focus â€" newspaper site
• Ramsey County Historical Society

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Most individual U.S. states collect a state income tax in addition to federal income tax. The two are separate entities. Some local governments also impose an income tax, often based on state income tax calculations. Forty-three states and many localities in the United States may impose an income tax on individuals. Forty-seven states and many localities impose a tax on the income of corporations.

State income tax is imposed at a fixed or graduated rate on taxable income of individuals, corporations, and certain estates and trusts. The rates vary by state. Taxable income conforms closely to federal taxable income in most states, with limited modifications. The states are prohibited from taxing income from federal bonds or other obligations. Most do not tax Social Security benefits or interest income from obligations of that state. Several states require different useful lives and methods be used by businesses in computing the deduction for depreciation. Many states allow a standard deduction or some form of itemized deductions. States allow a variety of tax credits in computing tax.

Each state administers its own tax system. Many states also administer the tax return and collection process for localities within the state that impose income tax.

State income tax is allowed as a deduction in computing federal income tax, subject to limitations for individuals.

Basic principles

State tax rules vary widely. The tax rate may be fixed for all income levels and taxpayers of a certain type, or it may be graduated. Tax rates may differ for individuals and corporations.

Most states conform to federal rules for determining:

• gross income,
• timing of recognition of income and deductions,
• most aspects of business deductions,
• characterization of business entities as either corporations, partnerships, or disregarded.

Gross income generally includes all income earned or received from whatever source, with exceptions. The states are prohibited from taxing income from federal bonds or other obligations. Most states also exempt income from bonds issued by that state or localities within the state, as well as some portion or all of Social Security benefits. Many states provide tax exemption for certain other types of income, which varies widely by state. The states imposing an income tax uniformly allow reduction of gross income for cost of goods sold, though the computation of this amount may be subject to some modifications.

Most states provide for modification of both business and non-business deductions. All states taxing business income allow deduction for most business expenses. Many require that depreciation deductions be computed in manners different from at least some of those permitted for federal income tax purposes. For example, many states do not allow the additional first year depreciation deduction.

Most states tax capital gain and dividend income in the same manner as other investment income. In this respect, individuals and corporations not resident in the state generally are not required to pay any income tax to that state with respect to such income.

Some states have alternative measures of tax. These include analogs to the federal Alternative Minimum Tax in 14 states, as well as measures for corporations not based on income, such as capital stock taxes imposed by many states.

Income tax is self assessed, and individual and corporate taxpayers in all states imposing an income tax must file tax returns in each year their income exceeds certain amounts determined by each state. Returns are also required by partnerships doing business in the state. Many states require that a copy of the federal income tax return be attached to at least some types of state income tax returns. The time for filing returns varies by state and type of return, but for individuals in many states is the same (typically April 15) as the federal deadline .

Every state, including those with no income tax, has a state taxing authority with power to examine (audit) and adjust returns filed with it. Most tax authorities have appeals procedures for audits, and all states permit taxpayers to go to court in disputes with the tax authorities. Procedures and deadlines vary widely by state. All states have a statute of limitations prohibiting the state from adjusting taxes beyond a certain period following filing returns.

All states have tax collection mechanisms. States with an income tax require employers to withhold state income tax on wages earned within the state. Some states have other withholding mechanisms, particularly with respect to partnerships. Most states require taxpayers to make quarterly payments of tax not expected to be satisfied by withholding tax.

All states impose penalties for failing to file required tax returns and/or pay tax when due. In addition, all states impose interest charges on late payments of tax, and generally also on additional taxes due upon adjustment by the taxing authority.

Individual income tax

Forty-three states impose a tax on the income of individuals, sometimes referred to as personal income tax. State income tax rates vary widely from state to state. The states imposing an income tax on individuals tax all taxable income (as defined in the state) of residents. Such residents are allowed a credit for taxes paid to other states. Most states tax income of nonresidents earned within the state. Such income includes wages for services within the state as well as income from a business with operations in the state. Where income is from multiple sources, formulary apportionment may be required for nonresidents. Generally, wages are apportioned based on the ratio days worked in the state to total days worked.

All states that impose an individual income tax allow most business deductions. However, many states impose different limits on certain deductions, especially depreciation of business assets. Most of the states allow non-business deductions in a manner similar to federal rules. Few allow a deduction for state income taxes, though some states allow a deduction for local income taxes. Eight of the states allow a full or partial deduction for federal income tax.

In addition, some states allow cities and/or counties to impose income taxes. For example, most Ohio cities and towns impose an income tax on individuals and corporations. By contrast, in New York, only New York City and Yonkers impose a municipal income tax.

States with no individual income tax

Nine U.S. states do not level a broad-based individual income tax. Some of these do tax certain forms of personal income:

1. Alaska â€" no individual tax but has a state corporate income tax. Like New Hampshire, Alaska has no state sales tax, but unlike New Hampshire, Alaska allows local governments to collect their own sales taxes. Alaska has an annual Permanent Fund Dividend, derived from oil revenues, for all citizens living in Alaska after one calendar year, except for some convicted of criminal offenses.
2. Florida â€" no individual income tax but has a 5.5% corporate income tax. The state once had a tax on "intangible personal property" held on the first day of the year (stocks, bonds, mutual funds, money market funds, etc.), but it was abolished at the start of 2007.
3. Nevada â€" has no individual or corporate income tax. Nevada gets most of its revenue from sales taxes and the gambling and mining industries.
4. Tennessee has a "Hall income tax" of 6% on income received from stocks and bonds not taxed ad valorem. The Hall income tax is reduced to 5% for tax year 2016, with legislative intent that the tax be statutorily reduced by one percent annually beginning with the first annual session of the 110th general assembly and potentially eliminated by 2022. In 1932, the Tennessee Supreme Court struck down a broad-based individual income tax that had passed the General Assembly, in the case of Evans v. McCabe. However, a number of Attorneys General have recently opined that, if properly worded, a state income tax would be found constitutional by today's court, due to a 1971 constitutional amendment.
5. Texas â€" no individual income tax, but imposes a franchise tax on corporations. In May 2007, the legislature modified the franchise tax by enacting a modified gross margin tax on certain businesses (sole proprietorships and some partnerships were automatically exempt; corporations with receipts below a certain level were also exempt as were corporations whose tax liability was also below a specified amount), which was amended in 2009 to increase the exemption level. The Texas Constitution places severe restrictions on passage of an individual income tax and the use of its proceeds.
6. Washington â€" no individual tax but has a business and occupation tax (B&O) on gross receipts, applied to "almost all businesses located or doing business in Washington." It varies from 0.138% to 1.9% depending on the type of industry.
7. Wyoming has no individual or corporate income taxes.
8. South Dakota â€" no individual income tax but has a state corporate income tax on financial institutions.
9. New Hampshire â€" has an Interest and Dividends Tax of 5%, and a Business Profits Tax of 8.5%. A Gambling Winnings Tax of 10% went into effect July 1, 2009 and was repealed May 11, 2011. New Hampshire has no sales tax.

States with flat rate individual income tax

The following eight states have a flat rate individual income tax as of 2016:

• Colorado â€" 4.63% (2016)
• Illinois â€" 3.75% (2016) (until 2025, when the rate will fall to 3.25%)
• Indiana â€" 3.3% (2016) (until 2017, when the rate will fall to 3.23%. Note also that counties may impose an additional income tax). See Taxation in Indiana
• Massachusetts â€" 5.1% (2016) (most types of income)
• Michigan â€" 4.25% (2016) (22 cities in Michigan may levy an income tax, with non-residents paying half the rate of residents)
• North Carolina â€" 5.75% (2016); 5.499% (2017)
• Pennsylvania â€" 3.07% (many municipalities in Pennsylvania assess a tax on wages: most are 1%, but can be as high as 3.9004% in Philadelphia)
• Utah â€" 5.0% (2016)

Corporate income tax

Most states impose a tax on income of corporations having sufficient connection ("nexus") with the state. Such taxes apply to U.S. and foreign corporations, and are not subject to tax treaties. Such tax is generally based on business income of the corporation apportioned to the state plus nonbusiness income only of resident corporations. Most state corporate income taxes are imposed at a flat rate and have a minimum amount of tax. Business taxable income in most states is defined, at least in part, by reference to federal taxable income.

According to www.taxfoundation.org these states have no state corporate income tax as of Feb 1, 2010: Nevada, Washington, Wyoming, Texas, and South Dakota. However, Texas has a franchise tax based on "taxable margin", generally defined as sales less either cost of goods sold less compensation, with complete exemption (no tax owed) for less than $1MM in annual earnings and gradually increasing to a maximum tax of 1% based on net revenue, where net revenue can be calculated in the most advantageous of four different ways.

Nexus

States are not permitted to tax income of a corporation unless four tests are met under Complete Auto Transit, Inc. v. Brady:

• There must be a "substantial nexus" (connection) between the taxpayer's activities and the state,
• The tax must not discriminate against interstate commerce,
• The tax must be fairly apportioned, and
• There must be a fair relationship to services provided.

Substantial nexus (referred to generally as simply "nexus") is a general U.S. Constitutional requirement that is subject to interpretation, generally by the state's comptroller or tax office, and often in administrative "letter rulings".

In Quill Corp. v. North Dakota the Supreme Court of the United States confirmed the holding of National Bellas Hess v. Illinois that a corporation or other tax entity must maintain a physical presence in the state (such as physical property, employees, officers) for the state to be able to require it to collect sales or use tax. The Supreme Court's physical presence requirement in Quill is likely limited to sales and use tax nexus, but the Court specifically stated that it was silent with respect to all other types of taxes ("Although we have not, in our review of other types of taxes, articulated the same physical-presence requirement that Bellas Hess established for sales and use taxes, that silence does not imply repudiation of the Bellas Hess rule."). "Whether "Quill" applies to corporate income and similar taxes is a point of contention between states and taxpayers. The "substantial nexus" requirement of Complete Auto, supra, has b een applied to corporate income tax by numerous state supreme courts.

Apportionment

The courts have held that the requirement for fair apportionment may be met by apportioning between jurisdictions all business income of a corporation based on a formula using the particular corporation's details. Many states use a three factor formula, averaging the ratios of property, payroll, and sales within the state to that overall. Some states weight the formula. Some states use a single factor formula based on sales.

Nonbusiness income

Some states tax resident corporations on nonbusiness income regardless of apportionment. Generally, a resident corporation is one incorporated in that state. The definition of nonbusiness income varies but generally includes investment income of business corporations, including dividends.

Consolidated or unitary filings

Some states require and some states permit parent/subsidiary controlled groups of corporations to file returns on a consolidated or combined basis. California and Illinois require that all U.S. members of a "unitary" group must file a combined return.

Returns

State corporate income tax returns vary highly in complexity from two pages to more than 20 pages. States often require that a copy of the federal income tax return be attached to the state return. Corporate income tax return due dates may differ from individual tax return due dates. Most states grant extensions of time to file corporate tax returns.

History

Some of the English colonies in North America taxed property (mostly farmland at that time) according to its assessed produce, rather than, as now, according to assessed resale value. Some of these colonies also taxed "faculties" of making income in ways other than farming, assessed by the same people who assessed property. These taxes taken together can be considered a sort of income tax. The records of no colony covered by Rabushka (the colonies that became part of the United States) separated the property and faculty components, and most records indicate amounts levied rather than collected, so much is unknown about the effectiveness of these taxes, up to and including whether the faculty part was actually collected at all.

Rabushka makes it clear that Massachusetts and Connecticut actually levied these taxes regularly, while for the other colonies such levies happened much less often; South Carolina levied no direct taxes from 1704 through 1713, for example. Becker, however, sees faculty taxes as routine parts of several colonies' finances, including Pennsylvania.

During and after the American Revolution, although property taxes were evolving toward the modern resale-value model, several states continued to collect faculty taxes.

Between the enactment of the Constitution and 1840, no new general taxes on income appeared. In 1796, Delaware abolished its faculty tax, and in 1819 Connecticut followed suit. On the other hand, in 1835, Pennsylvania instituted a tax on bank dividends, paid by withholding, which by about 1900 produced half its total revenue.

Several states, mostly in the South, instituted taxes related to income in the 1840s; some of these claimed to tax total income, while others explicitly taxed only specific categories, these latter sometimes called classified income taxes. These taxes may have been spurred by the ideals of Jacksonian democracy, or by fiscal difficulties resulting from the Panic of 1837. None of these taxes produced much revenue, partly because they were collected by local elected officials. A list:

The 1850s brought another few income tax abolitions: Maryland and Vermont in 1850, and Florida in 1855.

During the American Civil War and Reconstruction Era, when both the United States of America (1861-1871) and the Confederate States of America (1863-1865) instituted income taxes, so did several states.

As with the national taxes, these were made in various ways to produce substantial revenue, for the first time in the history of American income taxation. On the other hand, as soon as the war ended, a wave of abolitions began: Missouri in 1865, Georgia in 1866, South Carolina in 1868, Pennsylvania and Texas in 1871, and Kentucky in 1872.

The rest of the century balanced new taxes with abolitions: Delaware levied a tax on several classes of income in 1869, then abolished it in 1871; Tennessee instituted a tax on dividends and bond interest in 1883, but Kinsman reports that by 1903 it had produced zero actual revenue; Alabama abolished its income tax in 1884; South Carolina instituted a new one in 1897 (eventually abolished in 1918); and Louisiana abolished its income tax in 1899.

Following the 1895 Supreme Court decision in Pollock v. Farmers' Loan & Trust Co. which effectively ended a federal income tax, some more states instituted their own along the lines established in the 19th century:

However, other states, some perhaps spurred by Populism, some certainly by Progressivism, instituted taxes incorporating various measures long used in Europe, but considerably less common in America, such as withholding, corporate income taxation (as against earlier taxes on corporate capital), and especially the defining feature of a "modern" income tax, central administration by bureaucrats rather than local elected officials. The twin revenue-raising successes of Wisconsin's 1911 and the United States' 1914 income taxes prompted imitation. Note that writers on the subject sometimes distinguish between corporate "net income" taxes, which are straightforward corporate income taxes, and corporate "franchise" taxes, which are taxes levied on corporations for doing business in a state, sometimes based on net income. Many states' constitutions were interpreted as barring direct income taxation, and franchise taxes were seen as legal ways to evade these bars. The term "franchise tax" has nothing to do with the voting franchise, and franchise taxes only apply to individuals insofar as they do business. Note that some states actually levy both corporate net income taxes and corporate franchise taxes based on net income. For the following list see and.

This period coincided with the United States' acquisition of colonies, or dependencies: the Philippines, Puerto Rico, and Guam from Spain in the Spanishâ€"American War, 1898â€"99; American Samoa by agreements with local leaders, 1899-1904; the Panama Canal Zone by agreement from Panama in 1904; and the U.S. Virgin Islands purchased from Denmark in 1917. (Arguably, Alaska, purchased from Russia in 1867, and Hawaii, annexed in 1900, were also dependencies, but both were by 1903 "incorporated" in the U.S., which these others never have been.) The Panama Canal Zone was essentially a company town, but the others all began levying income taxes under American rule. (Puerto Rico already had an income tax much like a faculty tax, which remained in effect for a short time after 1898.)

A third of the current state individual income taxes, and still more of the current state corporate income taxes, were instituted during the decade after the Great Depression started:

A "mirror" tax is a tax in a U.S. dependency in which the dependency adopts wholesale the U.S. federal income tax code, revising it by substituting the dependency's name for "United States" everywhere, and vice versa. The effect is that residents pay the equivalent of the federal income tax to the dependency, rather than to the U.S. government. Although mirroring formally came to an end with the Tax Reform Act of 1986, it remains the law as seen by the U.S. for Guam and the Northern Mariana Islands because conditions to its termination have not yet been met. In any event, the other mirror tax dependencies (the U.S. Virgin Islands and American Samoa) are free to continue mirroring if, and as much as, they wish.

The U.S. acquired one more dependency from Japan in World War II: the Trust Territory of the Pacific Islands.

Two states, South Dakota and West Virginia, abolished Depression-era income taxes in 1942 and 1943, but these were nearly the last abolitions. For about twenty years after World War II, new state income taxes appeared at a somewhat slower pace, and most were corporate net income or corporate franchise taxes:

As early as 1957 General Motors protested a proposed corporate income tax in Michigan with threats of moving manufacturing out of the state. However, Michigan led off the most recent group of new income taxes:

In the early 1970s, Pennsylvania and Ohio competed for businesses with Ohio wooing industries with a reduced corporate income tax but Pennsylvania warning that Ohio had higher municipal taxes that included taxes on inventories, machinery and equipment.

A few more events of the 1970s:

(Also during this time the U.S. began returning the Panama Canal Zone to Panama in 1979, and self-government, eventually to lead to independence, began between 1979 and 1981 in all parts of the Trust Territory of the Pacific Islands except for the Northern Mariana Islands. The resulting countries - the Marshall Islands, the Federated States of Micronesia, and Palau - all levy income taxes today.)

The only subsequent individual income tax instituted to date is Connecticut's, from 1991, replacing the earlier intangibles tax. The median family income in many of the state's suburbs was nearly twice that of families living in urban areas. Governor Lowell Weicker's administration imposed a personal income tax to address the inequities of the sales tax system, and implemented a program to modify state funding formulas so that urban communities received a larger share.

Numerous states with income taxes have considered measures to abolish those taxes since the Late-2000s recession began, and several states without income taxes have considered measures to institute them, but only one such proposal has been enacted: Michigan replaced its more recent value-added tax with a new corporate income tax in 2009.

Rates by jurisdiction

Alabama

The corporate income tax rate is 6.5%.

Alaska

Alaska does not have an individual income tax.

Arizona

Personal income tax

Reference:

Corporate income tax

The corporate income tax rate is 6%.

Arkansas

California

Personal income tax

Reference:

Corporate income tax

The standard corporate rate is 8.84%, except for banks and other financial institutions, whose rate is 10.84%.

Colorado

Colorado has a flat rate of 4.63% for both individuals and corporations.

Connecticut

Personal income tax

Corporate income tax

Connecticut's corporate income tax rate is 7.5%.

Delaware

Personal income tax

Reference:

Corporate income tax

Delaware's corporate income tax rate is 8.7%.

State individual income tax rates and brackets

State corporate tax rates and brackets

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Taxation in Puerto Rico takes the form of both Federal and Commonwealth taxes. Puerto Rico has independent tax-levying authority by provisions of 48 U.S.C. § 734 of the United States code.

Federal taxes

Though the Commonwealth government has its own tax laws, Puerto Ricans are also required to pay most US federal taxes, with the major exception being that most residents do not have to pay the federal personal income tax. In 2009, Puerto Rico paid $3.742 billion into the US Treasury. Residents of Puerto Rico pay into Social Security, and are thus eligible for Social Security benefits upon retirement. However, they are excluded from the Supplemental Security Income (SSI), and the island actually receives a small fraction of the Medicaid funding that it would receive if it were a US state. Also, Medicare providers receive less-than-full state-like reimbursements for services rendered to beneficiaries in Puerto Rico, even though the latter paid fully into the system.

The federal taxes paid by Puerto Rico residents include import/export taxes, Federal commodity taxes, social security taxes, among others. Residents also pay federal payroll taxes, such as Social Security and Medicare taxes.

Only certain residents of Puerto Rico are required to file federal income tax forms. According to the Internal Revenue Service:

In general, United States citizens and resident aliens who are bona fide residents of Puerto Rico during the entire tax year, which for most individuals is January 1 to December 31, are only required to file a U.S. federal income tax return if they have income sources outside of Puerto Rico or if they are employees of the U.S. government. Bona fide residents of Puerto Rico generally do not report income received from sources within Puerto Rico on their U.S. income tax return. However, they should report all income received from sources outside Puerto Rico on their U.S. income tax return. Residents of Puerto Rico who are employed by the government of the United States or who are members of the armed forces of the United States also should report all income received for their services to the government of the United States on their U. S. income tax return.

United States citizens or resident aliens who are not bona fide residents of Puerto Rico during the entire tax year are required to report all income from whatever source derived on their U.S. income tax return. However, a U.S. citizen who changes residence from Puerto Rico to the United States and who was a bona fide resident of Puerto Rico at least two years before changing residence can exclude from U.S. taxable income the Puerto Rican source income received while residing in Puerto Rico during the taxable year of such change of residence.

Bona fide residents of Puerto Rico cannot claim deductions and/or credits allocable to or chargeable against Puerto Rican source income that is excluded from a U.S. tax return. The deductions and credits not attributable to specific income must be divided between excluded income from sources in Puerto Rico and income from all other sources to find the part that can be deducted or credited on a U.S. tax return. Examples of deductions not attributable to specific income include alimony, the standard deduction, and certain itemized deductions such as medical expenses, charitable contributions, and real estate taxes and mortgage interest on your personal residence. Personal exemptions are generally allowed in full.

If you have taxable Puerto Rican source income on your U.S. income tax return, then you can claim a credit for foreign taxes paid to Puerto Rico. However, you are not allowed to claim a credit for foreign taxes paid with respect to Puerto Rican source income that is excluded from a U.S. tax return. Therefore, to properly calculate your foreign tax credit, you must reduce your foreign taxes paid by the amount of taxes allocable to excluded Puerto Rican source income.

Employers in Puerto Rico are subject to both Federal Insurance Contributions Act (FICA) tax (a payroll withholding tax, which funds Social Security and Medicare) and the Federal Unemployment Tax Act (FUTA). Employers in Puerto Rico must withhold the employee portion of FICA taxes from their employees' wages and contribute the employer portion of FICA.

Commonwealth taxes

Puerto Rico imposes a separate income tax in lieu of federal income tax. All federal employees, those who do business with the federal government, Puerto Rico-based corporations that intend to send funds to the US, and some others also pay federal income taxes (for example, Puerto Rican residents who are members of the US military, and Puerto Rico residents who earned income from sources outside Puerto Rico).

In addition, because the cutoff point for income taxation is lower than that of the US IRS code, and the per-capita income in Puerto Rico is much lower than the average per-capita income on the mainland, more Puerto Rico residents pay income taxes to the local taxation authority than if the IRS code were applied to the island. That occurs because "the Commonwealth of Puerto Rico government has a wider set of responsibilities than do U.S. State and local governments." As residents of Puerto Rico pay into Social Security, Puerto Ricans are eligible for Social Security benefits upon retirement but are excluded from the Supplemental Security Income (SSI) (Commonwealth of Puerto Rico residents, unlike residents of the Commonwealth of the Northern Mariana Islands and residents of the 50 States, do not receive the SSI), and the island actually receives less than 15% of the Medicaid funding it would normally receive if it were a state. However, Medicare providers receive less-than-full st ate-like reimbursements for services rendered to beneficiaries in Puerto Rico even though the latter paid fully into the system In general, "many federal social welfare programs have been extended to Puerto Rican (sic) residents, although usually with caps inferior to those allocated to the states." However, it has also been estimated that because the population of the island is greater than that of 50% of the states, if it were a state, Puerto Rico would have six to eight seats in the House of Representatives, in addition to the two seats in the Senate. A common misconception is that the import/export taxes collected by the U.S. on products manufactured in Puerto Rico are all returned to the Puerto Rico Treasury. That is not the case, as such import/export taxes are returned only for rum products, and even then, the US Treasury keeps a portion of the taxes.

The main body of domestic statutory tax law in Puerto Rico is the Internal Revenue Code of Puerto Rico (Spanish: Código de Rentas Internas de Puerto Rico). The code organizes commonwealth laws covering commonwealth income tax, payroll taxes, gift taxes, estate taxes and statutory excise taxes.

Sales tax

On July 4, 2006, the government approved Law Number 117, The 2006 Contributive Justice Law, establishing a tax with a 5.5% rate at state level and an optional 1.5% rate at municipal level. The tax went into effect on November 15, 2006. The tax is better known as the Sales and Use Tax' (Impuesto sobre Ventas y Uso), often referred to by its Spanish acronym "IVU". The law amended Article B of the Code and created subarticle BB. On July 29, 2007, the government approved Law Number 80, making the tax mandatory for all municipalities of the island. Also, the tax rates changed to 6% at the state level and 1% at the municipal level.

The tax originated in some municipalities (Caguas, Yauco and Villalba) in 2005. Seeing the economic success of these municipalities, many other municipalities enacted sales tax ordinances, usually by copying the ordinance of Caguas. By the middle of 2006, more than 30 municipalities had enacted sales and uses taxes on the island. During the second and third quarters of 2006, the Commonwealth of Puerto Rico suffered several political struggles in its Legislative Assembly. They were largely caused of the budget deficit of the government and the refusal of the Legislative Assembly to approve the taxes proposed by the Governor of the Island. Government offices were shut down until the Assembly approved Law 117, which included the first sales tax of that possession of the United States.

On July 1, 2006, the first Commonwealth-wide sales tax was approved with a 5.5% rate at state level and an optional 1.5% rate at municipal level. The adoption of the municipal tax was mixed. The tax went into effect on November 15, 2006. Since the tax reform of July 2007, the tax is applied in all 78 municipalities of the island and at Commonwealth level. On February 6, 2008, the governor of the island proposed to remove the state part of the IVU. Also, with the February 6, 2008 changes, the tax rates are now 6% at the state level and 1% at the municipal level.

On July 1, 2015, the sales tax rate was increased to 11.5%, in response to the island's suffering economy. The new tax contributes 1% to the municipality and 10.5% to the state.

The IVU is scheduled to expire on April 1, 2016, to be replaced with a value-added tax (VAT) of 10.5% for the state level, with the 1% IVU continuing for the municipalities.

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TurboTax is an American tax preparation software package developed by Michael A. Chipman of Chipsoft in the mid-1980s. Intuit acquired Chipsoft, based in San Diego, in 1993. Chipsoft, now known as Intuit Consumer Tax Group, is still based in San Diego, having moved into a new office complex in 2007. Intuit Corporation is headquartered in Mountain View, California.

TurboTax for the Mac was originally named MacinTax, and was developed by SoftView. SoftView was in turn purchased by ChipSoft.

TurboTax is one of the most popular income tax preparation software packages in the United States, along with its main competitors, Jackson Hewitt, H&R Block at Home, TaxSlayer, and TaxAct.

Overview

There are a number of different versions, including TurboTax Deluxe, TurboTax Premier, etc. TurboTax is available for both federal and state income tax returns. The software is designed to guide users through their tax returns step-by-step. The TurboTax software provides taxpayers additional support for their self-prepared returns by offering Audit Defense from TaxResources, Inc.

Typically, TurboTax federal software is released late in the year and the state software is released mid-January to mid-February. TurboTax normally releases its new versions as soon as the IRS completes revisions to the forms and approves the TurboTax versions, usually late in the tax year. The process is similar for states that collect income taxes.

In 2001, TurboTax saved financial institution passwords entered by users to servers at Intuit and the home computer. The programming error was reportedly fixed, but as of 2012 Turbo Tax offers no option to download a data file directly from the financial institution. Instead, it prompts the user for their login name and password at the financial institution or permits the data to be entered by hand.

In 2003, Intuit faced vocal criticism for its TurboTax activation scheme. The company responded by removing the product activation scheme from its product. In 2005 TurboTax extended its offering by allowing any taxpayer to use a basic version of its federal product for free as part of the Free File Alliance. By 2006 that offer has been limited to free federal online tax preparation and e-file for taxpayers whose adjusted gross income is $28,500 or less (or $52,000 for those in the military) and those 50 or under. TurboTax has received a number of complaints regarding its advertising of the free version. For filers who use this basic version of the software, federal filing is free. However, state tax filing is not free, and the cost of using TurboTax to file state returns is not presented to the user until they've already completed entering their information for federal returns.

In 2008, Intuit raised the price of TurboTax for desktop customers by $15 and included a free e-filing for the first return prepared. The company's new "Pay Per Return" policy was criticized for adding a $9.95 fee to print or e-file each additional return after the first, including returns prepared for members of the same household. On December 12, 2008 the company announced that it had rescinded the new policy.

On January 21, 2009, TurboTax received considerable public attention at the Senate confirmation hearing of Timothy F. Geithner to be the United States Secretary of Treasury. Geithner had testified that he used TurboTax to prepare his tax returns for the years 2001 to 2004 but had incorrectly handled the self-employment taxes due as a result of his being employed by the International Monetary Fund. Geithner made it clear that he took responsibility for the error, which was discovered in a subsequent IRS audit, and did not blame TurboTax. Geithner paid $42,702 in back taxes. Intuit responded by releasing a statement saying "TurboTax, and all software and in-person tax preparation services, base their calculations on the information users provide when completing their returns."

In 2014 the Times of San Diego reported that 48% of Americans are not aware they must report their health insurance status on their 2014 tax returns, This report was based on a TurboTax survey conducted by Harris Poll.

International versions

Intuit also addresses Canadian tax returns with an entirely separate product also named TurboTax, but previously called QuickTax. The French version has retained its original name, ImpôtRapide.

Controversies

Writing to the boot track

The 2003 version of the TurboTax software contained digital rights management that tracked whether it had previously been installed on a computer by writing to sector 33 on the hard drive. This allowed it to track if it was on a computer previously, even through reinstalling the operating system. This also caused it to conflict with some boot loaders that store data there, rendering those computers unbootable.

Opposition to return-free filing

Intuit, the owner of TurboTax, spent more than $11 million on federal lobbying between 2008 and 2012. Intuit "opposes IRS government tax preparation," particularly allowing taxpayers to file pre-filled returns for free, in a system similar to the established ReadyReturn service in California. The company also lobbied on bills in 2007 and 2011 that would have barred the Treasury Department, which includes the IRS, from initiating return-free filing. An Intuit spokeswoman said in early 2013 that "Like many other companies, Intuit actively participates in the political process." She said that return-free filing had "implications for accuracy and fairness in taxation."

In its 2012 Form 10-K, Intuit said that "We anticipate that governmental encroachment at both the federal and state levels may present a continued competitive threat to our business for the foreseeable future."

Repositioning of versions

In January 2015 it become known that the Deluxe version no longer supports IRS Schedules C, D, E, and F in interview mode. Although the Deluxe version still allows entry into those schedules by means of "form mode", doing so may result in the loss of the ability to file electronically. In addition, the Premium version no longer supports Schedule C or F in interview mode. Intuit was widely criticized for these changes and responded with short-term mitigation, although it has not reversed the decision. On February 5, 2015 Intuit sent a second email apology to current and former customers regarding the decision to remove specific schedules from the Deluxe and Premium versions. Intuit also apologized for their poorly received initial apology sent on January 27. In the February 5 message Intuit announced that they would reverse course in their 2015 Deluxe and Premium versions, including the schedules that were historically included in the software.

Fraudulent return claims

In an article by Brian Krebs on February 15, 2015 it was reported that Intuit Inc. temporarily suspended the transmission of state e-filed tax returns due to a surge in complaints from consumers about refunds already claimed in their name.

In a later article on February 22, 2015, Krebs reported that it was alleged by two former employees that Intuit knowingly allowed fraudulent returns to be processed on a massive scale as part of a revenue boosting scheme. Both employees, former security team members for the company, stated that the company had ignored repeated warnings and suggestions on how to prevent fraud. One of the employees was reported to have filed a whistleblower complaint with the US Securities and Exchange Commission.

Reception

BYTE in 1989 listed MacInTax as among the "Distinction" winners of the BYTE Awards, stating that "several of us have found [it] to be our favorite ... a must if you're doing your own taxes".

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A tax refund or tax rebate is a refund on taxes when the tax liability is less than the taxes paid. Taxpayers can often get a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the withholding taxes and estimated taxes that they paid, plus the refundable tax credits that they claim. (Tax refunds are money given back at the end of the financial year.)

By country

United States

According to the Internal Revenue Service, 77% of tax returns filed in 2004 received a refund check, with the average refund check being $2,100. In 2011, the average tax refund was $2,913. Taxpayers may choose to have their refund directly deposited into their bank account, have a check mailed to them, or have their refund applied to the following year's income tax. As of 2006, tax filers may now split their tax refund with direct deposit in up to three separate accounts with three different financial institutions. This has given taxpayers an opportunity to save and spend some of their refund (rather than only spend their refund). Every year, a number of U.S. taxpayers around the country get tax refunds even if they owe zero income tax. This is due to withholding calculations and the earned income tax credit. Because withholding is calculated on an annualized basis, an individual just entering the work force or unemployed for a long period of time will have more ta x than is owed withheld. Refund anticipation loans are a common means to receive a tax refund early, but at the expense of high fees that can reach over 200% annual interest. In the 1990s, refunds could take as long as twelve weeks to come back to the taxpayer; however, the average time for a refund is now six weeks, with refunds from electronically filed returns coming in three weeks.

Some people believe that getting a large tax refund is not as desirable as more accurate withholding throughout the year, as a large refund represents a loan paid back by the government interest-free. Optimally, a return should result in a payment owed of just less than would cause a penalty charge, which is 100% of the prior year's tax (110% for high income individuals), 90% of the current year's tax, or $1,000 for individuals who have direct withholding and do not pay estimated tax. In order to decrease the amount of the tax refund which has to be received by taxpayers, they can turn to one or several of the following methods:

• adjust the amount of tax the federal government withholds from the paycheck. It is recommended for taxpayers to do this in cases where their adjustments to income, exemptions, and deductions remain relatively steady from year-to-year, and if the government consistently is required to give a large refund.
• in the case of people entirely exempt from state tax, they can check with their state income tax authority to see if there is an appropriate form that can be completed and filed, which would exempt them from state withholding
• check tax rates and adjusted gross income thresholds (applicable if taxpayers are hovering near the bottom of certain tax brackets and changes have been made to the thresholds and/or tax rates)
• take advantage of the medical expense deduction (applicable for medical expenses now imposed for tax years starting in 2013)
• maximizing the amount allowed to save tax-free for retirement

However, some people use the tax refund as a simple "savings plan" to get money back each year (even though it is excess money that they paid earlier in the year). Another argument is that it is better to get a refund rather than to owe money, because in the latter case one might find oneself without sufficient funds to make the necessary payment. When properly filled out, the Form W-4 will withhold approximately the correct amount of tax to eliminate a refund or amount owed, assuming the W-4 was filled out at the beginning of the tax year.

A U.S. federal law signed in 1996 contained a provision that required the federal government to make electronic payments by 1999. In 2008, the U.S. Treasury Department paired with Comerica Bank to offer the Direct Express Debit MasterCard prepaid debit card. The card is used to make payments to federal benefit recipients who do not have a bank account. Tax refunds, however, are exempt from the electronic payments requirement. However, many U.S. states send tax refunds in the form of prepaid debit cards to people who do not have bank accounts.

New Zealand

In New Zealand, income tax is deducted by the employer under the PAYE (Pay As You Earn) tax system. This information is collected and held by the Inland Revenue Department (New Zealand) (IRD) and is not automatically processed. However individual earners can request a summary of earnings to see if they have overpaid or underpaid their tax for each given financial year. To claim a tax refund, a personal tax summary must be filed; this can be done by dealing with the IRD directly or through a Tax Agent. If a personal tax summary is requested in a situation where tax would be owing, a debt is created, so correct calculations prior to this request are important, and these core services are offered by third party Tax Agents. Tax Agents in New Zealand are largely self-regulating, with the Online Tax Association of New Zealand (OTANZ) providing guidance and governing rules for New Zealand's largest 4 tax refund agencies whom serve most of the market for personal tax refunds.

India

In India, there is a provision of refund of excess tax along with interest. For claiming a refund one has to file the income tax return within a specified period. However, under Sections 237 and 119(2)(b) of the Income Tax Act, the Chief Commissioner or Commissioner of Income Tax are empowered to condone a delay in the claim of a refund.

Provisions of refund of duty exists in indirect taxation. In Section 11 B of the Central Excises Act, 1944 which is also applicable in the cases of Service Tax (Finance Act, 1994).

Ireland

In the Republic of Ireland, income tax is deducted by the employer under the PAYE (Pay As You Earn) tax system. If incorrect tax credits are applied by the employer, then a refund of tax is due. Tax refunds may also be due for income deductions that are applied after the tax year has ended, if one finishes working prior to the year end, or for joint assessment of taxes for a married couple. Tax refunds must be claimed within four years of the end of the tax year if the one is assessed under the PAYE tax system.

References

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