At the federal level, the Internal Revenue Service (IRS) administers tax collection and enforcement. Every taxpayer—whether an individual, sole proprietor, partnership, corporation, or trust—must file an annual return reporting income, deductions, and credits. However, the federal return is only part of the picture. Most states impose their own income taxes, and each state’s tax code is unique. Some states, like Texas and Florida, have no personal income tax, while others, such as California and New York, have progressive tax structures with rates that can exceed 10%. Understanding these differences is critical, especially for individuals who live in one state and work in another, or for businesses operating across multiple jurisdictions.