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How do you know if you will owe taxes

how do you know if you will owe taxes

Things You'll Need

Form 1040 and instructions


Determine your total tax liability by completing your tax return. For federal taxes, you will probably use Form 1040EZ, Form 1040A or Form 1040. The more complex your finances are, the more likely you are to use Form 1040. For example, to claim certain tax deductions, you must use either Form 1040A or Form 1040. If you want to itemize your deductions, you must use Form 1040. In addition, states that assess personal income tax have their own tax forms that you are responsible for filing.

Total the amount of money you’ve had withheld at your jobs. At the end of the year, each of your employers will send you a W-2 form showing your taxable income and how much money they withheld for federal, state and local taxes. Box 2 on your W-2 shows the money withheld for federal taxes; box 17 shows money withheld for state taxes; box 19 shows money withheld for local taxes, if applicable.

Add the total amount

of estimated tax payments you’ve made to the various levels of government, if you made estimated tax payments during the year. For example, if an employer withheld $1,500 for federal taxes and you made an additional $400 in estimated federal tax payments, you’ll have paid $1,900 for federal income taxes. If you didn't make any estimated tax payments, skip this step.

Subtract the amount of money you’ve had withheld (from Step 3) from the taxes you owe (from Step 1). If the amount is positive, you owe that much in taxes. If the amount is negative, you will receive a tax refund. You must compute each government level separately and it’s possible you could owe money to one tax agency and receive a refund from another. For example, if you owe $4,000 in federal taxes but had $4,500 withheld in federal taxes, and you owe $3,200 in state taxes but only had $3,000 withheld, you would get a $500 tax refund from the federal government but would have to pay $200 in state taxes.

Category: Taxes

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