TAX NEWS - 2010

An Easy Method to Figure Out Federal Tax

There are many reasons you may want to know how to calculate your income tax without doing a full tax return. One reason to do a quick calculation of your tax is to determine when you should do your actual tax return. Somtimes you are going to get a big tax return so you want to get it as soon as you possibly can. If you are going to owe the IRS money, you probably want to wait until the last minute or even request an extension. If you are trying to figure out how to calculate income tax easily read on. When you are ready to do your taxes, you can save a lot of money by using income tax return software software and get the same results as with an expensive tax professinal.

The first thing you need to know to calculate income tax is how much money you made and how much you have paid in taxes. This information can be found on your pay stub or your W2. You need to look at the "net" number because you don't have to pay taxes on certain things like 401K contributions. Write these 2 numbers down as we will need them later.

Now, you have to determine how many deductions you have. This includes charitable contributions, (like to your church), mortgage interest, your deductions per person in your household, and anything else that is tax deductible. All of these things added up equal your deductions. Don't worry about being exact because you are just getting an estimate right now.

Now that you have your income and deductions, I will show you exactly how to calculate income tax. All you do is subtract your deductions from your income and look up how much tax you owe for that amount. You can go to the IRS site and look up the tax table or check out 2009 Tax Estimator page. Based on your filing status and net income, you will see how much you owe. Compare that to the amount of tax that was taken out of your paycheck and you have your return amount or how much you owe.

There are some special modifiers for income tax that you may need to take into consideration. One example of credits is the child tax credit of around $1000 per child that reduces the amount of tax you have to pay. There are also penalties for things like early withdrawals from an IRA.