When a person makes an income, that income is subject to Federal Income Tax.  In the previous section, money was withheld from a person’s paycheck to pay the FIT, but not all income is subject to payroll taxes and automatic FIT withholding.

Think of contract income where you are paid an amount to do a job (say $1,000), and then you receive a $1,000 check.  Usually, with instances such as this, taxes are not withdrawn.  

Other forms of income include rental income, investment income, business income, etc.  With these forms of income, income taxes are not automatically withdrawn, but they are still subject to taxation.  To calculate your federal income tax due, each year businesses and individuals are required to complete a Federal Income Tax Return.  This form will compile all forms of income, subtract all forms of authorized expenses, and then provide a number on which taxes must be calculated.