How to Figure Out Income Tax
If you know your income, you can figure out your income tax liability now, rather than waiting until the end of the year. Doing so can help you determine whether or not you will owe money or get money back at the end of the year. While the tax code may seem complicated, the formula for computing your income tax is fairly simple. Once you know your total income, deductions and credits, you can compute your tax liability in minutes.
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Things You'll Need
- Earnings statements (including pay stubs, child support, alimony, interest and dividends)
- IRS Form 1040 and instructions
Instructions
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1
Download an IRS 1040 Form, along with the 1040 instructions from the IRS website.
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2
Determine what your filing status is and your exemptions. Refer to your W-4 to figure out the exemptions you are claiming. You may claim yourself, your spouse and dependents.
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3
Determine your total income. Include your salary and any tips, fringe benefits, alimony, welfare benefits, unemployment benefits, interest and dividends.
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4
Subtract any exemptions, deductions and adjustments from your total income. This will give you your estimated taxable income.
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5
Refer to the 2009 IRS tax tables in your 1040 instruction booklet to determine your tax rate for your taxable income. This will give you your tax liability.
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Subtract any tax credits that you qualify for, such as the Earned Income Credit, from your tax liability. The remainder is a good estimate of your income tax liability.
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Tips & Warnings
If you aren't sure about your deductions or credits, refer to a tax professional to maximize your deductions and credits. Refer to your pay stub to see how much you are currently paying toward your liability to determine if you need to make adjustments to your exemptions or withholdings.
