Financial Accounting Help - Microsoft Small Business

Debits and Credits (listen carefully)

What Is An IRS Tax Return?

An IRS tax return is a form used to file income taxes with the Internal Revenue Service. Tax returns are usually set up in a worksheet form. They must be filed each year for an individual or business receiving an income during the year, regardless if it is regular or wage income, dividends, interest, capital gains and other profits.

The IRS or Internal Revenue Service is a US government institution assigned in collecting both annual income and state tax from residents and businesses. Many people pay their income taxes to the IRS every year, although some may be required to make quarterly prepayments exceeding the income threshold. Income tax returns are based on the calendar year with yearly payments due not later than April 15 of the following year. An extension request may be acceptable, although estimated payments should accompany the request for an extension, which should be filed early.

IRS tax returns are calculated on a sliding scale, with higher incomes in higher IRS tax groups. While the exact table of taxes change every year, the bottom line is the more you earn, the more you will be taxed. For people who are paid on an hourly basis, the estimated taxes are derived from every pay check. At the year's end, one may get refund for overpayment or requires to pay more tax if an inadequate amount was deducted during the year.

Tax returns are based on the net income or the amount left after deductions. A person falling within the poverty bracket may not be required to pay an income tax at all, although a salary of $50,000 every year could end up costing the person earning it roughly twenty percent of his or her net income. Those earning $120,000 or more might actually fall into the tax bracket nearer to twenty-five percent of his or her income.

The importance of your income tax forms does not always end after you file them. In several instances, whether you are going to buy a car, get a mortgage or trying o acquire loan from a bank, a record of your latest income tax returns will be required for them to be able to approve your request. Actually, the IRS tax return transcript is not a replica or copy of your income tax form, but rather it is a summary of the details that you should know with regards to your income tax.

Furthermore, this form can also be used if you want to make adjustments on your income tax. Additionally, this also shows detailed information about you as the taxpayer, which includes some basic information such as your present marital status and the final adjusted gross income that you have applied.

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Significant differences between US GAAP and IFRS

1. Financial periods required

US GAAP: Generally, comparative financial statements are presented; however, a
single year may be presented in certain circumstances. Public companies must
follow SEC rules, which typically require balance sheets for the two most recent
years, while all other statements must cover the three-year period ended on
the balance sheet date.

IFRS:Comparative information must be disclosed in respect of the previous
period for all amounts reported in the financial statements.

2. Income statement —classification of expenses

US GAAP:SEC registrants are required to present expenses based on function (for
example, cost of sales, administrative).

IFRS: Entities may present expenses based on either function or nature (for example,
salaries, depreciation). However, if function is selected, certain disclosures
about the nature of expenses must be included in the notes.

3.Changes in equity

US GAAP:Present all changes in each caption of stockholders’ equity in either a footnote
or a separate statement.

IFRS:At a minimum, present components related to “recognized income and
expense” as part of a separate statement (referred to as the SORIE if it
contains no other components). Other changes in equity either disclosed in the
notes, or presented as part of a single, combined statement of all changes in
equity (in lieu of the SORIE).

4.Disclosure of performance measures

US GAAP:SEC regulations define certain key measures and require the presentation
of certain headings and subtotals. Additionally, public companies are
prohibited from disclosing non-GAAP measures in the financial statements
and accompanying notes.

IFRS:Certain traditional concepts such as “operating profit” are not defined;
therefore, diversity in practice exists regarding line items, headings and
subtotals presented on the income statement when such presentation is
relevant to an understanding of the entity’s financial performance