The IRS taxes the incomes of those individuals whose earnings meet or exceed the specified minimum requirement. Normally, taxes are automatically withheld from an employee’s check by an employer. However, each year in April citizens must still file an individual income tax return. Depending on the total amount of earnings for the year and filing status, there will be either an underpayment or overpayment of taxes. An underpayment requires individuals to send in an additional payment when they file or make an approved payment arrangement with the IRS. An overpayment of taxes results in a refund check from the IRS to an individual. A failure to pay an amount of taxes owed results in penalties, fines or even imprisonment.
The IRS taxes corporations and other business entities as well. Just like individuals, businesses are responsible for accurately reporting their income to the Internal Revenue Service so that the correct amount of taxes can be levied. Because there are some differences in the way corporate income is reported as compared to individual income, many rely on the help of a professional tax preparer to put their financial information in order. This is to make sure the IRS taxes the right and accurate amount of income; otherwise, a business can find itself looking at an audit of all its financial records.