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Your Step-By-Step Guide To Knowing How To Pay Income Taxes

Dec 14, 2007
There's a saying that goes something like, "There's nothing certain in life but death and taxes" and it is attributed to Benjamin Franklin. It's certainly the truth. Taxes are something that no one can avoid, even if they wish to. But that doesn't mean that you can't learn as much as you can in order to make tax time and tax payments all the less stressful.

In truth, there are a lot of ways to make sure that tax time isn't a time of year to worry about. By learning about the different taxes that apply to you and to your personal and professional situations, you can begin to understand how you can make choices that will help increase not only your tax refund, but also (possibly) your happiness with the Internal Revenue Service.

The IRS is the looming figure in many jokes about taxes, but they are also set up to be sure that everyone pays what they owe. No matter if you're a big business or a small business, you have to pay the government back, but knowing just what is expected can help to ease the burden of not knowing what to expect.

The Federal Income tax is probably the most heard of tax in the country. You need to think about income tax whenever you take in any money for yourself from a job or from any other sources, so it's something that most of us already know. The federal income tax system is set up as a progressive tax, the more you make the more you pay, and that applies to individuals, corporations, trusts, descendants' estates and certain bankruptcy estates.

While more is said about the idea of individual income taxes, it is certain that any income from any source is probably going to have some sort of taxation upon it. The formula for the federal income tax is not difficult to understand as well. You make a certain amount of money before taxes that is shown on your tax form.

If its possible to reduce this number with deductions, you will reduce the amount of money the government can tax you on. The IRS then sets up a taxation table based off of the adjusted gross income that you receive from this formula, giving you your tax rate. The maximum rate of tax that is paid is 35%.

Now, if you've had taxes taken out from each paycheck, as most people do, you will then subtract the tax rate amount from the amount that you paid. If the amount ends up as a positive number, then you're going to get a tax refund. But if you get a negative number, this means that you will still be required to pay money to the government.

Some businesses and individuals also like to pay just enough tax during the year so that they don't end up owing anything, but also so they don't get a refund. Because, in essence, this refund is a 'free' loan for the government until you receive that refund check. The amount you are required to pay can be decreased through deductions. The more deductions you have will decrease the overall gross income that you are taxed, resulting in lower income taxes.
About the Author
Craig Chambers is a tax and financial planner who enjoys sharing tips on income taxes and offers extensive free tax guides, and a free "special report" on taxes. Plus you can download the author's new tax guide handbook on his website www.taxesandtax.com
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