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How do you estimate your tax return

how do you estimate your tax return

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Determine your total taxable income. Companies that you work for will send you a W-2 form showing your taxable income. If you are an independent contractor, you will receive a 1099 form. For banks or other financial institutions that pay you taxable interest, you will receive a 1099-INT form. Add the total taxable amounts from all of these forms.

Subtract any above-the-line deductions that you are eligible to take from your total taxable income. These include student loan interest, most contributions to traditional IRAs and alimony you paid to a former spouse.

Determine whether you will take the standard deduction or itemize your deductions. If you claim any itemized deductions, you cannot claim the standard deduction so you should calculate the total amount you can deduct from itemized deductions, including mortgage interest, charitable giving and medical expenses exceeding 7.5 percent of your adjusted gross income. If this total is larger than your standard deduction, you should itemize.

Subtract the standard deduction

or the total of your itemized deductions from your taxable income.

Calculate your tax bill by using your total taxable income and the tax brackets for the current year. For example, in 2009 if your filing status is head of household, the first $11,950 of your taxable income is taxed at 10 percent while income above $372,950 is taxed at 35 percent.

Determine the amount of money you have made in tax withholding payments directly to the IRS or through your employer. Payments made through your employer will be listed on your W-2 forms.

Subtract the amount of money you paid in withholding, found in Step 6, from your tax bill, found in Step 5. If the result is positive, you owe the government that amount of money. If it is negative, you are entitle to a refund of that amount. For example, if you made $12,600 in tax withholding payments and your tax bill was only $11,300, you would be entitled to a refund of $1,300.

Category: Taxes

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