What is the primary purpose of an income tax return?

The primary purpose of an income tax return is to report income, expenses, and calculate tax liability. This process serves several important functions within the tax system. By filing an income tax return, individuals and businesses disclose their total income for the year, detailing various sources such as wages, salaries, interest, dividends, and any other income streams.

In addition to reporting income, the tax return also allows taxpayers to itemize or claim deductions for qualifying expenses, such as business expenses, educational costs, and mortgage interest. This comprehensive reporting enables the calculation of the taxpayer's total tax liability, which is the amount of tax owed to the government based on their income and applicable tax rates. By accurately filing a return, individuals ensure compliance with tax regulations and can determine their eligibility for potential tax credits or refunds, further affecting their financial situation.

The other answer choices specify functions that are not primary roles of an income tax return. For instance, reporting only investment income is too narrow of a scope, as tax returns encompass all forms of income. Estimating future income and determining eligibility for loans are also not functions performed through the tax return process; instead, they may examine different financial documents and predictions. Thus, the comprehensive nature of tax returns in reporting income and expenses