An income disclosure statement details all income earned from all sources for a given period of time. Both individuals and companies may file income disclosure statement for a variety of reasons, including compliance with tax laws. Some positions, such as government or public service jobs, require all employees to file an income disclosure statement. These statements can also be analyzed to give a general idea of income levels within a profession, company, or industry.
A basic income disclosure statement will require the individual or organization to list all earnings for a set period of time, often for the previous financial year. This may include income earned from a regular job as well as from freelance work, contracts, investments, and sale of property. Depending on applicable laws, it may also include income earned from inheritances or through gambling, such as lottery winnings. For an income disclosure statement to be considered complete, all forms of income must be listed, including those earned overseas.
Often, a income statement will be filed as part of a larger financial disclosure. For instance, even though a company's gross income totals $500,000 US dollars (USD) for the year, this number can be meaningless without information about the expenses and losses of the company. If the company's expenditures total $600,000 USD, the income is negated by the losses. Looking at an income disclosure statement as part of a full financial disclosure gives a more exact idea about where the money was earned, how it was spent, and if profits or losses occurred.
The reasons for filing an income disclosure statement can vary enormously, depending on the circumstances. Families going through a divorce or custody battle may be required to submit an income disclosure statement so that a judge can determine a fair division of assets and responsibilities. Businesses often provide shareholders with income statements to let them know how the company is performing financially. In many cases, income disclosures must be filed for tax purposes, so that state and federal tax officials can determine the correct taxation rate and amount owed.
Political figures and public service officials are often required to submit financial disclosure statements for public consumption. This custom, which in some regions is actually law, is a means of maintaining transparency in public office. By requiring political and governmental workers to publicly release their income statements, the government can help ensure that employees are not taking advantage of their positions within the government to get around tax requirements. In political campaigns, financial disclosure is often a topic of heated debate, as citizens and rivals carefully parse the earnings, expenditures, and tax rates of political hopefuls.
