Final answer:
To file your federal and state taxes, you must prepare different forms for each type of government if your state requires it, as federal and state tax systems have their own specific forms and regulations.
Step-by-step explanation:
To file your federal and state taxes, the correct statement is that you: A.) must prepare different forms for each type of government (if your state requires it). When dealing with federal and state taxes, it is important to recognize that separate tax forms are often necessary, as each government entity has its own requirements and regulations. The 1040EZ tax form is an example of a federal form which is the simplest to file. Tax preparation software can generally be used for both federal and state tax returns. Therefore, statements B and C are incorrect as they indicate that you can only use tax preparation software for one and not the other, which is not true.
State taxes can often be deducted from your federal taxes, a fact that highlights the interconnectivity of state and federal tax systems despite their separate filings. It's worth noting that state and local governments use the revenues from taxes to fund various services like road repair and education, while the federal government uses its tax revenues for a wide array of services and transfers to households and firms. The W-4 form you fill out when starting a job affects how much tax is withheld from your paycheck and underscores the importance of proper tax preparation and filing.