# Taxpayer: Definition, Overview, and Types

![A stressed taxpayer hold their head as they work on a desktop computer showing a IRS 1040 return with a nearby calculator, checkbook, and a stack of receipts](https://www.investopedia.com/thmb/lnBvPhC892MBG_vCDFBjFuPYlmM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/TaxpayerGettyImages-172791674-967166a8e51449ebb575e1785aac35bb.jpg)

*— PictureLake / Getty Images Plus*

> **Definition**
>
> A taxpayer is an individual or business entity that is legally required to pay taxes to federal, state, or local governments.

## What Is a Taxpayer?

A taxpayer may be an individual or business entity that is obligated to pay taxes to a federal, state, or local government. Taxes from both individuals and businesses are a primary source of revenue for governments. In the United States, individual taxpayers are usually required to file and pay both federal and state tax returns annually. Businesses must also file annual returns but usually plan for and pay regular estimated tax payments throughout the year.

### Key Takeaways

*   A taxpayer is an individual or business entity that is obligated to pay taxes to a federal, state, or local government.
*   Taxes from both individuals and businesses are a primary source of revenue for governments.
*   Individuals and businesses have different annual income tax obligations.
*   Taxes that are ultimately due on earned and unearned income are based on filing status, brackets, adjustments to income, tax credits, and tax deductions.

## Understanding Taxpayers

The U.S. tax code is legislated and enforced by federal, state, and local governments. The [Internal Revenue Service](https://www.investopedia.com/terms/i/irs.asp) (IRS) is the primary governing agency overseeing the implemented [income tax](https://www.investopedia.com/terms/i/incometax.asp) code for both individuals and businesses.

State and local revenue agencies are responsible for implementing and enforcing localized taxes such as sales taxes and property taxes. Both individuals and businesses must be aware of their tax obligations since not paying necessary taxes can result in penalties or further legal actions.

## Types of Taxpayers

### Individuals

There are specific thresholds governing the obligation to pay annual individual income taxes to the IRS and state revenue departments. The federal threshold is based on an individual’s filing status. Each state will also have its own thresholds.

Individual taxpayers should check both the federal and state thresholds to determine their filing obligations for a given year. The Internal Revenue Service’s Publication 501: Dependents, Standard Deduction, and Filing Information, provides federal tax guidance for individual taxpayers.

An individual’s filing status will influence how much tax is withheld from payroll. It is also a primary factor influencing annual tax obligations for a given year. Individual taxpayers must therefore maintain the same filing status with their employer that they plan to use for their annual tax filing. Improperly notating the tax filing status on employee withholding forms like [Form W-4](https://www.investopedia.com/terms/w/w4form.asp) can result in withholding too much or too little which will be reconciled at tax-filing time.

Generally, marriage and dependents (usually children) are the two things that will characterize a taxpayer’s status. If married, an individual can choose to file separately or jointly. Taxpayers also have the option to file as a widower if their spouse has died.

Individuals who are not obligated to file annual tax returns will still encounter taxes in their everyday life. Other than income taxes, taxes are imposed daily and annually through [sales taxes](https://www.investopedia.com/terms/s/salestax.asp) on goods and services and [property taxes](https://www.investopedia.com/terms/p/propertytax.asp) required to be paid separately to local governments. Sales taxes and property taxes vary based on location.

### Filing Thresholds

Not all individuals in the U.S. are obligated to file a federal tax return and a state tax return. The federal threshold for filing a tax return is detailed by filing the status below. Individual states follow similar status standards but can have differing thresholds.

Some people may not need to file tax returns at all. Some people may benefit from filing a return even if below thresholds because they can be paid a refund with applicable deductions and credits.

Individual taxpayers need a Social Security number to file tax returns. Social Security numbers can be obtained from the Social Security Administration. A Social Security number will serve as a taxpayer identification number so it is important to obtain one if you plan to have tax obligations.

In general, there is no age level associated with paying federal and state taxes. Any individual who has gross income at or above the threshold levels outlined below should file a tax return.

### Single Taxpayer

A taxpayer is considered single if s/he is unmarried, divorced, a registered domestic partner, or legally separated according to state law as of the last day of the tax year. The head of a household or a widowed person doesn't fall under the “single” category for tax purposes. [Single filers](https://www.investopedia.com/terms/s/single.asp) have lower income thresholds for tax filing obligations.

### Head of Household

A [head of household](https://www.investopedia.com/terms/h/head_of_household.asp) is a single or unmarried taxpayer who pays at least 50% of the costs of supporting their household and lives with other [qualifying family members](https://www.investopedia.com/terms/m/memberofhousehold.asp) for whom they provide support for more than half of the year. The taxpayer must have paid more than half of the total household bills, including rent or mortgage, utility bills, insurance, property taxes, groceries, repairs, and other common household expenses.

Some examples of qualifying family members include a dependent child, grandchild, brother, sister, or grandparent.

### Married Filing Jointly

Two taxpayers who wed by the end of the tax year can file their tax returns jointly. When filing under [married filing jointly](https://www.investopedia.com/terms/m/mfj.asp) status, couples can record their respective incomes and deductions on the same tax return. A joint tax return will often provide a bigger [tax refund](https://www.investopedia.com/terms/t/tax-refund.asp) or a lower [tax liability](https://www.investopedia.com/terms/t/taxliability.asp).

Married filing jointly is best if only one spouse has a significant income. If both spouses work and the income and [itemized deductions](https://www.investopedia.com/terms/i/itemizeddeduction.asp) are large and very unequal, it may be more [advantageous to file separately](https://www.investopedia.com/articles/tax/08/file-seperately.asp).

### Married Filing Separately

[Married filing separately](https://www.investopedia.com/terms/m/mfs.asp) is a tax status used by married taxpayers who choose to record their respective incomes, [deductions](https://www.investopedia.com/terms/t/tax-deduction.asp), and credits on separate tax returns. Married filing separately may be appealing to couples who find that combining their income pushes them into a higher tax bracket than either of them would be in if they filed separately.

There is a potential tax advantage to filing separately when one spouse has significant medical expenses, miscellaneous itemized deductions, or certain available credits.

### Qualifying Widow(er)

This category of taxpayer is also referred to as a surviving spouse. The federal [qualifying widow or widower](https://www.investopedia.com/terms/q/qualifying-widow.asp) tax filing status is available for two years for widows and widowers with dependents after their spouse's death.

> **Important**
>
> Individual taxpayers may choose single, head of household, married filing jointly, married filing separately, or widower as their filing status for their annual income tax return filing.

## Individual Tax Rates and Standard Deductions

Individual taxpayers who must file an annual federal tax return are subject to the following tax rates and standard deductions for 2025 as detailed by their filing status.

All individual taxpayers are entitled to the following standard deductions:

## Form 1040

The 1040 tax form makes filing easy for individual taxpayers with simple returns. It covers half a page and can be referred to as postcard filing. However, while the front page 1040 is simplified, many taxpayers will have to attach relevant forms or schedules depending on their situations.

## Self-Employed Business Taxes for Individuals

Self-employed or sole-proprietor taxpayers may need to file a Schedule C with their 1040. Schedule C is primarily an income statement for self-employed workers and sole proprietors. It includes 1099 income. These individuals may qualify for certain business deductions.

## Taxes for Partnerships, Other Small Entities

Partnerships and limited liability companies (LLCs) are business entities with more than one owner. These entities make up a large portion of the small businesses in the United States. Other types of small entities that may need to consider annual income tax filings can include trusts, estates, and qualified joint ventures.

Partnerships and LLCs are usually taxed as partnerships. For federal taxes, partnerships typically file Form 1065 which is an informational return with K-1 reporting that passes the taxable income or loss to the individual taxpayer owners. Therefore, partners also pay taxes on their K-1 income and file this report using a 1040 Form, which is then subject to individual 1040 tax rates.

## Taxes for Corporations

Corporations typically make regular estimated tax payments throughout the year. These payments are reconciled with the annual tax filing. Most corporations will file a [Form 1120](https://www.investopedia.com/terms/f/form-1120s.asp).

Form 1120 serves as the primary tax filing document for most corporations and can be compared to Form 1040 for individuals. Like the 1040, Form 1120 also requires attached forms and schedules depending on a corporation’s situation.

## What Are the Advantages of Filing As Head of Household?

Those who qualify for the head of household filing status can enjoy more income than a single filer before moving into the next highest tax bracket. They also receive a larger standard deduction than single filers.

## What Are the Pros and Cons of Being Married and Filing a Separate Return?

Spouses who file joint married returns are liable for the entirety of any resulting tax obligation. This is the case even if one spouse earns nothing. That individual would still be responsible for paying the entire tax debt resulting from the income of the other. Filing a separate return protects against this.

Married filers of separate returns are prohibited from claiming certain tax breaks, however. They include the Earned Income Tax Credit and the Child and Dependent Care Credit.

## What Is the Self-Employment Tax?

The employer and employee each pay one-half of an employee's Social Security and Medicare taxes. The IRS considers that a self-employed individual is both employer and employee and must therefore pay 100% of their Social Security and Medicare tax obligation.

## The Bottom Line

A significant number of adults are taxpayers. They have income or they own assets on which they’re obligated to pay taxes to federal, state, or local governments. Taxpayers also include businesses that share the same types of obligations.

Most governments provide some relief from taxes in the form of credits, deductions, and exemptions. Consider consulting with a tax professional if you’re filing a tax return for the first time or if you have any questions about your rights and responsibilities.

> **Article Sources**
>
> 1.  Internal Revenue Service. "[The Agency, its Mission and Statutory Authority](https://www.irs.gov/about-irs/the-agency-its-mission-and-statutory-authority)."
>     
> 2.  Internal Revenue Service. "[Publication 501: Dependents, Standard Deduction, and Filing Information](https://www.irs.gov/pub/irs-pdf/p501.pdf)." Page 2.
>     
> 3.  Internal Revenue Service. "[Individual Taxpayer Identification Number](https://www.irs.gov/individuals/individual-taxpayer-identification-number)."
>     
> 4.  Internal Revenue Service. "[Publication 501: Dependents, Standard Deduction, and Filing Information](https://www.irs.gov/pub/irs-pdf/p501.pdf)." Pages 2, 6.
>     
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>     
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