Taxpayer

Taxpayer: Definition, Overview, and Types

Key takeaways
* A taxpayer is an individual or business legally required to pay taxes to federal, state, or local governments.
* Tax obligations and filing rules differ for individuals, self‑employed persons, partnerships, and corporations.
* Filing status, tax brackets, deductions, credits, and special rules (for example, self‑employment tax) determine how much tax is owed.

What is a taxpayer?
A taxpayer is any person or entity obligated to pay taxes to a government authority. For individuals this generally means filing federal (and often state) income tax returns annually. Businesses also file annual returns and, depending on their structure, make periodic estimated tax payments throughout the year. Taxes are a primary revenue source for federal, state, and local governments.

How taxes are administered
The Internal Revenue Service (IRS) administers and enforces the federal income tax code. State and local revenue agencies handle regional taxes such as sales and property taxes. Failing to meet tax obligations can lead to penalties or legal action, so taxpayers should know the rules that apply to their situation.

Types of taxpayers and common filing rules

Individuals
Individual taxpayers must determine whether their income meets federal and state filing thresholds and choose the correct filing status. Filing status affects withholding, tax brackets, and eligibility for deductions and credits. Common filing statuses:
* Single — unmarried, divorced, or legally separated as of the last day of the tax year.
* Head of household — unmarried taxpayers who pay more than half the cost of keeping up a home and have a qualifying dependent living with them for more than half the year.
* Married filing jointly — married couples who combine incomes and deductions on one return; often yields favorable tax treatment.
* Married filing separately — spouses file separate returns; can protect each spouse from liability for the other’s tax but often limits access to certain credits and deductions.
* Qualifying widow(er) — surviving spouse who can use married filing jointly tax rules for a limited number of years if they have a dependent.

Filing thresholds and identification
Not everyone must file a federal return; thresholds depend on filing status and income types. Even if not required, filing may be beneficial to claim refunds or tax credits. Individuals need a taxpayer identification number, commonly a Social Security number, to file.

Self‑employed and sole proprietors
Self‑employed individuals and sole proprietors typically report business income and expenses on Schedule C attached to Form 1040. They are responsible for the full share of Social Security and Medicare taxes (self‑employment tax), since they are treated as both employer and employee for these payroll taxes. Self‑employed taxpayers may make quarterly estimated tax payments.

Partnerships, LLCs, and other small entities
Partnerships and many multi‑owner LLCs generally file informational returns (Form 1065) and issue Schedule K‑1s to partners or members. The entity’s income or loss passes through to individual owners, who report it on their personal returns and pay tax at individual rates. Trusts, estates, and certain joint ventures have their own filing rules.

Corporations
Most corporations file Form 1120 and pay tax at corporate rates. Corporations typically make estimated tax payments during the year that are reconciled on the annual return. Corporate tax treatment differs substantially from pass‑through entities and can affect how income is taxed at the entity and shareholder levels.

Key tax considerations

Filing status effects
Choosing the correct filing status matters for tax rates, standard deductions, and eligibility for credits. Head of household status generally provides a higher standard deduction and wider tax brackets than single status. Married filing jointly often gives better overall tax results than filing separately, but filing separately can limit liability and may be advantageous in specific situations (e.g., very unequal medical expenses).

Self‑employment tax
Employees split Social Security and Medicare taxes with employers. Self‑employed taxpayers pay both halves and report this via self‑employment tax, in addition to income tax. They may deduct the employer‑equivalent portion of self‑employment tax when calculating adjusted gross income.

Forms commonly used by taxpayers
* Form 1040 — individual income tax return.
* Schedule C (Form 1040) — profit or loss from business for sole proprietors.
* Form 1065 — partnership informational return; issues Schedule K‑1 to partners.
* Form 1120 — corporate income tax return.

When to seek professional help
Tax rules can be complex, especially for first‑time filers, those with business income, or entities with multiple owners. Consult a tax professional for guidance on filing status, deductions, credits, estimated payments, and entity selection.

Sources (selected)
IRS publications and forms including Publication 501 (Dependents, Standard Deduction, and Filing Information), Form 1040, Schedule C, Form 1065, and Form 1120.