Learn How Much Tax To Pay This Year

If you are wondering how much tax to pay, you may be thinking about your "tax bracket." Tax bracket is a term Americans commonly use to refer to the Tax Rate Schedule set by the IRS each year. It is not actually called a "tax bracket," and asking the IRS to tell you your tax bracket will get you nowhere. Instead, consult the Tax Rate Schedule to begin. Then, begin adjusting for your personal situation.

Tax Rate Schedule

The Tax Rate Schedule is provided yearly by the IRS. You can find it on Page 8 of the 1040 ES, as of the tax year 2010. This page gives you a breakdown of the standard deduction, standard federal tax and the percentage tax you will be assessed based on your income. Since the US operates on a progressive tax system, the more you make the more you will owe. As of 2010, the lowest tax rate was 10 percent for those earning equal to or less than $8,375. For those earning more than $373,650, the highest tax rate of 35 percent was applicable. It is important to note that these rates are for an individual filing separately; tax rates change for married couples.

Adjusting your Income

It is important to recognize you are taxed on your adjusted income, not on your gross income. For example, if you earned $40,000 this year but contributed $6,000 to a qualified retirement plan, then you only will be taxed on $32,000 of income. Further, you will be able to deduct items like vehicle costs, charitable contributions and business expenses in many cases. The IRS incentivizes activities like saving, investing and giving to charities through the deduction option. It is important to include all qualified deduction on your 1040 or similar document each year in order to adjust your income appropriately.

Determining How Much you Paid

Each year, you will have to make regular contributions to the IRS as you go. Waiting until the end of the year will result in penalties. For most employees, an employer automatically withholds this amount from a paycheck by using a W-2. At the end of the year, the W-2 is returned to the employee. The employee only needs to transfer the dollar amount paid to the reporting form. For some individuals who are self-employed or work as independent contractors, an employer may not be contributing. Therefore, these individuals must estimate tax payments during the year. Using the tax bracket schedule will help create an estimate.

Determining How Much you Owe

Most people will receive a refund at the end of a fiscal year if they make regular contributions at the anticipated tax rate. This is because the initial taxes calculated are on gross income, and the end of year tax is calculated after income adjustment. So, if you have any deductions at year end and contribute the maximum amount possible in your tax bracket based on your gross income, you will receive a refund. Otherwise, you may owe money. If you owe, you will determine how much by filling out a 1040 and submitting it for approval to the IRS. Include a check with your submission.

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