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Individual income tax is often collected on a pay-as-you-earn basis, with small corrections made soon after the end of the tax year. These corrections take one of two forms: payments to the government, for taxpayers who have not paid enough during the tax year; and tax refunds from the government for those who have overpaid. Income tax systems will often have deductions available that lessen the total tax liability by reducing total taxable income. They may allow losses from one type of income to be counted against another.

Taxable Income - Taxable income is generally equal to a taxpayer´s ADJUSTED GROSS INCOME during the TAX YEAR less any allowable EXEMPTIONS and deductions.