The definition of income tax is the mandatory tax imposed by government entities onto businesses and legally employed citizens. In the U.S., income tax is collected and enforced by the Internal Revenue Service, or IRS. The IRS defines income tax levies on an individual basis, according to the taxable net income or revenue of a given person or organization.
A broader income tax definition includes the reasoning behind the taxes imposed—that is, to fund government operations. Income taxes are calculated and paid annually and are adjusted by the specific deductions available to an individual or business.
The income statement is one of the core financial statements for a business. Download an income statement template with multi-step and single-step variations.
