ANSWERS: 1
  • To figure how much you owe in taxes, you will need all your relevant wage and income statements from the last fiscal year, as well as any records you may have of deductible expenses. Follow the instructions on the tax return form and schedules to calculate your adjusted gross income and available deductions. Using these, you can look up your tax liability in the appropriate Tax Table, then subtract any applicable credits.

    Documentation

    Gather all your relevant income and expense statements for the fiscal year. This may include a form W-2 from your employer; an Internal Revenue Service (IRS) Form 1098 from your mortgage holder reporting interest payments you have made; any forms 1099, schedule K-1 or other documentation of income; as well as receipts and records for any expenses you intend to deduct.

    Income

    Add together all your pretax employment income from any W-2 forms and enter the total on the appropriate line. If you received interest income, dividend payments, alimony payments, unemployment compensation or Social Security benefits; or if you had gains or losses from business activities, farming activities, capital gains, rental property, royalties, partnerships, S-Corporations or trusts: then fill out any required forms and enter the resulting amounts on the proper lines. Add the amounts in the right-hand column to figure your total income.

    Adjusted Gross Income

    Certain types of expenses reduce your taxable income. If you had education expenses, a health savings account or moving expenses; if you pay Self-Employment Tax, alimony, student loan interest or tuition; or if you contributed to a traditional Individual Retirement Account (IRA), or you had certain other expenses: then see the instructions, fill out the required forms if indicated and enter the amounts on the appropriate lines. Add all these adjustments together and subtract the total from your income as figured above. The result is your adjusted gross income.

    Tax And Credits

    If you are filing Form 1040, it is advisable to figure your itemized deduction before opting to take the standard deduction, because your itemized deduction may be greater. On Schedule A you can deduct interest payments, local taxes you paid, medical and dental expenses if they were less than 7.5 percent of your adjusted gross income, charitable donations and certain other expenses. Subtract your deductions from your adjusted gross income. Multiply the exemption amount (shown on the form) by the total number of exemptions you can claim for yourself, your spouse and your dependents. Subtract your total exemptions from your adjusted gross income less deductions. This is your taxable income. If the result is a negative number, enter zero; you do not have any taxable income. For most taxpayers, see the Tax Table in the instructions to look up the amount of your tax. There are different tax tables, depending on whether your taxable income is greater than $100,000. Be sure to use the correct one. However, in special circumstances you will need to see the instructions for the proper form or worksheet to calculate your tax liability. If you qualify for certain tax credits listed in this section, fill out the required forms, enter the amounts on the appropriate lines and subtract your credits from your tax liability. If you owe additional taxes, report them under "Other Taxes" and add them to the total from above to calculate your total tax.

    Payments

    Subtract from your total tax any income withheld from your paycheck and estimated tax payments you have made, as well as other credits you may qualify for. If the result is a negative number, you are due a refund. Otherwise, send a check to the IRS in the amount indicated.

    Source:

    IRS: Form 1040

    IRS: Instructions for Form 1040

    IRS: 1040 Schedule A

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