Your Complete Guide to the U.S. Tax Return Definition

Tax is the money paid by citizens and businesses to the government so that they can make roads, build and maintain public parks, fund the army, provide policing, offer schooling and education, and more. 

Have you ever wondered how the U.S. government decides how much tax each individual must pay? The government’s staff don’t go knocking at everyone’s door to examine our finances and then calculate our tax duty. No, in fact, we do the job ourselves — through a tax return. 

So, what is a tax return, exactly?

This article will introduce you to the tax return definition, give an overview of its three main sections, and answer the most frequently asked questions about this financial matter. 

Tax return definition 

A tax return, also known as a tax report, is a form or a set of forms issued by the government which you fill in to report your income, expenses, and other financial information. When you complete your tax return, you’ll know if you owe any money to the government and how much to pay. In the case that you overpaid your taxes, you can also request a refund by filing the tax return. 

The tax return form for individuals for United States federal taxes is Form 1040, whereas Form 1120 is for corporations, and Form 1065 is for partnerships.

See also: What Is Tax Season And How To Prepare For Your 2022 Tax Return

The three main sections of a tax return 

Typically, a tax return consists of the following three sections: 

Income 

The income section lists all your income sources, such as wages, salaries, dividends, self-employment income, and royalties. If you’re an employee, your income will be recorded in a W-2 form provided by your employer. 

Deductions 

Deductions, also known as tax write-offs, lower your tax liability, which essentially means the more deductions you claim on your tax return, the less tax you’ll have to pay. Just be aware and make sure you only claim deductions that you’re eligible for. 

Some typical deductions for individuals that you may be able to claim are interest paid on your mortgage or your student loans, charitable donations, and contributions to your retirement saving plans. For business owners, you can claim tax deductions for most expenses involved in business operations. 

Taxpayers can either take a standard deduction or itemized deductions. For those who opt for the former method, the standard deduction for the tax year 2022 is $12,950 for single filers, $25,900 for joint filers, and $19,400 for heads of households. The deduction amount may increase slightly each year to keep up with inflation. On the other hand, if you use itemized deductions for your tax return, you choose from various individual tax deductions rather than taking a fixed deduction amount. 

Tax credits  

Many people get confused between tax deductions and tax credits, so here is the key difference: deductions are subtracted from your taxable income while credits are subtracted directly from your total tax bill. For example, a tax credit of $1,000 will result in a $1,000 reduction in your tax bill. On the other hand, a $1,000 tax deduction lowers your taxable income (the amount of money you have to pay taxes on) by $1,000. So, if you are in the 22% tax bracket, a $1,000 deduction would save you $220.

Tax credits cover a wide range of expenses and situations: you can get tax credits if you purchase solar panels for use in your home, or for child-dependent care and education credits, etc.

See more: How To File Taxes For The First Time: A Complete Guide To All Your Questions.

Who has to file a tax return? 

While most U.S. citizens and permanent residents who work in the United States need to file a tax return — not everyone must do it. Whether you have to file a tax return depends on your age, filing status, income level, and source of money.

To find out if you need to file a tax return this year, check out this detailed guideline from the IRS (Internal Revenue Service): Publication 501 (2021), Dependents, Standard Deduction, and Filing Information

What happens if I make a mistake on my tax return? 

If you filed your tax return incorrectly or failed to include something, you need to notify the IRS. To do so, you would need to file an amended return with the IRS using Form 1040-X. You can file it yourself or have a professional prepare it for you. If you don’t inform the IRS of these mistakes yourself, you could face financial penalties and pay interest. 

How can I track my refund? 

You can use the IRS Where’s My Refund? tool or call the IRS directly at 800-829-1954 to check on the status of your refund 24 hours after you e-file. The IRS will give you an exact refund date once your tax return and refund are approved.

You’ll likely receive your refunds in less than 21 days.

Final thoughts 

Understanding the definition of “tax return” and how it’s calculated will help you become more confident in dealing with this important financial process. As a result, you’ll gradually learn how to file your tax return quicker and more accurately. 

A great tip for everyone who wants to streamline their tax return filing process is to have your receipts organized. Receipts help you record transactions correctly and serve as concrete evidence for your deduction claims. It might be too much of a task to do yourself — and that’s where Shoeboxed comes in. 

Shoeboxed is a well-trusted tool to help businesses, freelancers, and DIY accountants store and organize their receipts. It quickly scans and digitizes your receipts and documents, then automatically extracts, categorizes, and human-verifies important data from your receipts. On top of that, Shoeboxed also helps you manage expenses, store business cards, and track business mileage easily, helping you boost productivity and bring in more revenue. 
Go paperless with Shoeboxed for FREE today!

Business Finances 101: How to Manage Your Business Travel Expenses

Traveling is a pretty common activity that is necessary for employees and business owners to grow their business or fulfill their job responsibilities. During the trip, it’s extremely important to take care of your business travel expense reporting, as in many countries these expenses are tax-deductible (which means big savings for companies). What’s more, keeping track of your business travel expenses properly helps you avoid an unwanted IRS audit notice. 

This article will give you detailed instructions on managing your business travel expenses with the Shoeboxed app. Read on to discover! 

What are business travel expenses?

Business travel expenses are costs incurred when traveling for business purposes. These expenses include, but are not limited to, the cost of necessary products or services for the trip. The following chart lists some examples:

business travel expenses list

There are also certain exceptions that your company’s expense policy won’t cover, which include: 

  • Mini-bar contents
  • Shopping
  • Parking fines
  • Personal vehicles damage 
  • Corporate card late fees
  • Theft losses

How to manage your business travel expenses

There are many ways to keep track of your business travel expenses. We’ve listed five best practices that you can use straight away.

1. Use a company credit/spending card instead of cash

Cash is easy to spend, hard to track, and it’s nearly impossible to match cash spent with receipts. On the other hand, a credit card or debit card will provide you with monthly statements, enabling you to cross-check details with your paper receipts. It’s even better to pay with a business account and credit card, so you don’t mix business expenses with your personal spending. If your company doesn’t provide you with a credit/spending card or you’re self-employed, you can still pay business travel expenses with a separate personal card.  

2. Set out a clear expense submission and reimbursement process 

Whether you prefer paper forms, spreadsheets, or expense software, having a very clear process will help you keep track of the expense reimbursements. You can create a process and inform all of your employees. This will ensure that you’ll get all the information you need in a timely manner and save people from sending follow-up emails asking about the status of claims.

Here are some process steps you can consider:

  • Pre-trip expense projection: The business traveler will complete a projection before their trip, including the estimated spendings, with the manager’s confirmation. 
  • Receipt and invoice types: The business traveler will need to provide evidence of spending in an agreed document format (e.g., PDF or physical receipts, etc.) 
  • Expense claim submission timeline: The business traveler will need to submit expense claims within (for example) five working days of the business trip finishing.
  • Expense reimbursement period: The company commits to reimburse staff within (for example) 15 to 30 days of the expense claim. During this period, the company can examine and query expenses.

If your company doesn’t use any expense management software, then be sure to have standardized expense report forms accessible to all employees.

3. Organize your receipts properly

To have a comprehensive record of all your business expenses on a regular basis, first you need to organize your receipts properly. It’s a good idea to choose email invoices/receipts instead of paper, but in case you have no choice but to receive paper receipts, store them properly before scanning them into digital data. 

Doing this every day is best, otherwise, try to do it twice a week. Everything you spend must be recorded! The more granular your records, the better. Watch out for cash payments, these can be easily forgotten and left off your record, but they’re still business travel expenses. You can also check our 8 simple practices for small businesses to organize receipts efficiently.

4. Turn your paper receipts into digital data

Using a receipt scanning app can make it easier to scan receipts, keep track of and manage your business travel expenses. A receipt scanning app not only saves you from collecting and carrying piles of paper receipts, but they also offer numerous benefits, such as data-loss reduction, security, ease of access, long-term and unlimited storage, court-recognized legal documentation, and so much more. 

Many scanning apps which are now available even allow you to create expense reports from your smartphone. Turning your paper receipts into a digital format can simplify your expense tracking, increase your efficiency and get you ready for tax season. 

Shoeboxed is a painless receipt scanning and expense management solution for small businesses who are looking for the most versatile accounting app. Shoeboxed helps users scan paper receipts into digital data and create comprehensive and audit-ready expense reports from your receipts. Our human-data verification function will double-check to ensure that your receipts are human-verified, audit-ready, and accepted by both the Internal Revenue Service and the Canada Revenue Service. 

Shoeboxed’s exceptional features also allow users to track mileage for business and store business cards, which are essential for business travelers. Check out our step-by-step guide to scan a receipt with the Shoeboxed app!

5. Categorize your spending

Most accounting software or apps come with default suggested categories so you can easily start categorizing your spending. Try to stick to these standard categories as much as possible. It’s crucial, especially when it comes to filing your taxes because you’ll be able to clearly see which areas of your expenditures are higher or lower than they need to be.

The image below shows the Shoeboxed app‘s default expense categories that you can choose from. 

The bottom line

It can seem like a daunting task to stay on top of business travel expenses and maintain consistent work performance while you’re working away from your office. But having our guides handy will help you do all this with minimal stress. That’s because clear and simple practices help save you time and hustle, boost your compliance, and allow your managers to spend less time verifying expense reports. Shoeboxed can help you with all of this! 

Sign up to Shoeboxed today to claim your limited offer

Why Cash on Hand Is Important to Your Business?

Cash on hand is a crucial part of running a business as it influences numerous choices and decisions a business makes. If you want to run a sustainable business, you might want to consider the concept of cash on hand. In today’s article, we define what cash on hand is and its importance to a business.

What is cash on hand?

Cash on hand, also known as cash or cash equivalents (CCE), refers to the sum of all available cash a business has. This includes actual cash as well as accessible balances in checking, savings, money market assets, and other such accounts. In some cases, available credit funds may also be included.

To put it short, cash on hand doesn’t include only cash. It also comprises any liquid asset that could be quickly turned into cash—typically within 90 days. These include:

  • Money market assets
  • Marketable equity securities (stocks)
  • Marketable debt securities (bonds)
  • U.S. Treasuries assets
  • Mutual funds
  • Exchange-traded funds (ETFs)

The key distinction between cash on hand and other sorts of assets is the immediacy of access. In general, it isn’t necessary for the funds to be  physically present on the premises to be considered “on hand.” As long as the business has access within an immediate time frame, the funds are considered part of this category.

Four situations in which cash on hand is needed

Cash on hand is important to any business because it can mitigate risk and come in handy in a variety of situations. We discuss the major ones below. 

Cover expenses on time

Expenses are a necessary part of any business because they are the costs required to run a business. Expenses range from office rents and utility bills to marketing or sales campaigns budgets. 

Let’s say the utility bill is due on the 18th of the month. It’s the 15th, and you haven’t collected enough payments from your clients for some reason. It seems like you have to use extra business funds to cover this expense. 

Unfortunately, funds are already allocated to different uses or purposes, and there are no “spare” funds you could use. If you miss this payment, you’ll be charged a late fee. More importantly, your service may be switched off, and it’ll cause disruption to your business activities. 

Having cash on hand ensures you always have enough available cash or credit to cover expenses at all times and to avoid any unnecessary late fees. Additionally, you should always have an adequate contingency fund so that unexpected, urgent expenses can be paid without interrupting business activities. 

You might be also interested in: 5 Tips to Control Your Business’ Expenses

Reduce transaction costs

Transaction costs are fees incurred when you pay for a product or service through a gateway. If non-cash payments are your main payment option, chances are your business will have to pay a large amount of transaction fees. 

For small businesses or startups, it’s important to keep expenses as low as possible. One way to achieve this is by cutting out unnecessary or undesirable expenses such as payment processing fees from wire transfers, credit/debit cards, or gateways. 

However, when non-cash payments are becoming increasingly the norm in today’s world, it’s impossible for a business to stay completely cash-only. But you can at least lower payment processing fees by:

  • Choosing a low-fee payment processing system
  • Factoring these fees into your pricing
  • Negotiating lower fees
  • Accepting multiple forms of payments to balance out these fees

See more: Business Transaction: Definition, Types, And Example.

Survive an economic downturn

The COVID-19 pandemic has affected day-to-day life and has slowed down the global economy. It’s reported that over 200,000 businesses in the U.S. had to shut down their operations permanently due to the pandemic. 

If your business can survive this dark time and be able to reopen, not only will you have to adjust many of your business operation activities but also follow requirements to adapt to the new conditions. Organizations like the CDC issue such requirements to help businesses and their employees prevent exposure and infection of the Covid-19, for example, cleaning and sanitizing the facility, adding a new ventilation system, or plexiglass partitions. 

Having money on hand might be a lifesaver during these trying times. It’ll assist you in adapting to the “new normal” without going into debt.

Scale the business

Expanding your business may help you increase your customer base, improve sales, and most importantly, get higher profits. But scaling up a business requires both much harder work and lots of investment. 

When upscaling your business, you’ll have to invest in new technology and/or recruit new people. Technology, including software and machines, are frequently one-time purchases. So, rather than taking out a loan or a line of credit and having to pay interest for years, it makes more sense to use your current assets.

Sometimes, your business can grow bigger by acquiring another business. Mergers and acquisitions have become a popular business strategy for companies looking to expand into new markets or territories, gain a competitive edge, or acquire new technologies and skillsets. This sometimes appears to happen overnight. Without having immediate access to the funds to acquire a valuable business, you might miss out on a great opportunity.

The bottom line

Cash on hand refers to a business’s funds that can be used immediately. It comprises cash, any accessible balances in checking, savings, money market and liquid assets. Cash on hand is important to any business because it ensures there will be enough funds to cover expenses, survive an economic downturn or even scale a business.


If you’re interested in entrepreneurship stories, business tips, or productivity tools, find more posts like this on Shoeboxed. Shoeboxed is a cloud-based software that helps businesses turn their piles of paper receipts into digital data. With Shoeboxed, you can do tasks such as scan, store, and organize receipts, manage business expenses, and even track mileage for business travelers. It’s simple to install and easy to use.