The income tax laws of the United States are based on a progressive tax system. Essentially, this means that everyone pays a percentage of their income to the government: a higher amount when they earn more money and fewer tax dollars when they earn less money. Theoretically, this system distributes the tax burden more strongly among those who have more and, therefore, can contribute more. In the same way, the burden moves away from those who cannot pay so much.
Over time, tax deductions, credits, exemptions, and gaps have modified and complicated our system. However, the basics are not too complex. The US income tax system uses a relatively simple series of staggering tax rates to determine how much you owe.
How much do you owe?
Your total tax owed is based on your adjusted gross income. When you complete Form 1040 (or when your tax preparation software program does it for you), enter the appropriate totals for all the income you get from various categories, such as wages, alimony, unemployment, and business profits.
Then, take a variety of deductions, for example, contribute to an IRA or pay interest on student loans. Deductions mean you are reducing your taxable income, ultimately reducing the amount you pay in taxes. You must also deduct the money from your income for your personal tax exemption, as well as exemptions for dependents.
Once you add up all your income and subtract your deductions above the line, such as contributions to the IRA, you will end up with your adjusted gross income or AGI. While this figure is used to determine eligibility for certain tax credits, it is not your taxable income. From your AGI, you deduct your deductions and standard or itemized exemptions to arrive at your taxable income.
What are the tax supports?
The tax tables show the total amount of taxes you owe, but how does the IRS get the numbers in those tables? Perhaps the most important thing to know about the progressive tax system is that not all money is taxed at the same rate.
The first dollar you earn in a year is taxed at a lower rate than the last dollar you earn. If you earn $ 95,000 in a year and your neighbor earns $ 60,000, both start paying the same rate but end up with a higher rate. When you pass certain income thresholds, the percentage of income that you owe above that threshold increases.
Tax return from home
If your taxes are very simple, you can request them free from your phone, tablet or computer with H&R block calculator Free. You can also request it for free if you are paying tuition or receiving student loans.
In Bandit Offer, we tested H & R Block Free last year and were pleasantly surprised at how easy and fast it was.
Download the H & R Block calculator application on your phone and create an account. That facilitates the change to your computer at any time without losing any of your information. Take a picture of your W-2 and you will answer some quick questions.
If your taxes are a little more complicated, you may have to pay a small fee to file online. These options include:
Online luxury tax filing: it is similar to the free service because it does everything online. If your taxes are a little more complicated, for example, if you own a house or have children, this is a better option. It’s only $ 29.99, it’s not free, but it’s really affordable for professional tax preparation services.
Premium online tax presentation: use this if you are an independent professional or if you own shares or other investments. It costs $ 49.99.
Online tax claim for self-employed: use this if you are a self-employed or small business owner. It costs $ 79.99.
Professional tax preparation can be a blessing
Once, if you wanted a professional to do your taxes, you would have to drive personally to a tax office. You would sit there and do a little chat while an accountant flipped through your documents, selected a calculator and calculated your deductions.
These days, you can skip the trip. With H & R Block Tax Pro Go, you will upload your documents online, and a tax professional will do everything for you and will contact you within five days. Prices start at $ 59 but may increase depending on how complicated your taxes are.
It can help a professional to do their taxes on income since Uncle Sam is still playing with the tax codes. Some new rules will come into play this tax season. For example, the standard deduction is higher, but the personal exemption has been eliminated.
If you do not know what that means, join the club. Maybe it’s time to call a professional.
H & R Block calculator services can help you ensure you get the best possible reimbursement at a price you can afford.
Most people see how portions of each paycheck disappear towards the tax liability throughout the year with little understanding of how much they can owe when all is said and done. Then, before April of the next year, they expect an accountant or a tax preparation program to announce a final total for a refund or taxes owed.
Fortunately, you can eliminate the mystery of your tax rate, without the complex mathematics that many people expect the IRS to use. Now that you know how to navigate the tax tables, you can overcome the fog of determining your tax rate. You can make smarter decisions at the end of the year that can help make the tax season a little easier and ease the burden on your wallet when the time comes to pay the IRS.