How to Calculate Federal Tax
While you can calculate your federal taxes due by completing a Form 1040 in its entirety with all of the supporting documents, it is a good practice to estimate your tax liability at some point throughout the year as well. This may allow you to make changes to your situation to lower your tax liability in time for year-end. Estimating the taxes due with a blank Form 1040 and some estimated numbers is a good exercise and will help you understand the tax system better.
Calculate Gross Income
Gather all your documents pertaining to your income for the year. Have all your Form W-2s from each of your jobs and from your spouse's job. Complete Schedule
C if you are self-employed to figure your business income. Include any IRA disbursements, alimony and unemployment income. Enter each of these amounts separately on the appropriate lines of Form 1040 in the income section.
Calculate Adjustments to Income
Prepare to calculate your adjustments to income. Common adjustments include deductions for qualified retirement plans, self-employed health insurance premiums, health care savings account contributions, moving expenses and student loan deductions. Enter the totals from each of these categories and any others that apply in the adjustments to income section on Form 1040. Subtract the total adjustments from the total income and enter your adjusted gross income on line 37 of Form 1040.
Exemptions and Deductions
Progressive Tax SystemSource: finance.zacks.com