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Home FAQ on Tax Issues

How to Do Taxes ? I mean How to Compute Taxable Income & Tax ?

by Prashant Thakur
October 24, 2017
in FAQ on Tax Issues
0

That is a very commons question –how to do taxes ? Under Internal Revenue Code , there is a fixed procedure to compute your gross income , tax deductions, claim tax credits ,arrive at the taxable income and pay income tax as per your income tax bracket .Actually claim irs tax refund faster than others . Often , for a taxpayer the starting point of tax computation is most difficult and then claiming ta deductions and tax credits which have many ifs and buts conditions. Yes , there are many websites that provide how to do taxes online, but that helps a lot to those guys who understand some basics of the computation of income and taxes. So here are simple steps that one should follow to calculate his tax liability under IRC.

So here are the step :

Learning How to Do Taxes – in Steps

Step 1 : Add all your earned income and unearned income ( taxable plus non-taxable in your opinion ). This maybe called Gross Income.

[ In step 1 , you should write down all earned and unearned income -wages,perquisites,gifts, alimony , lottery income,dividend,interest etc and aggregate it to represent all income you received during the tax year.]

Step 2: From Gross Income – deduct Non-taxable Income . This is Gross Income.

[ Then , find out which receipts during the tax year , added in step 1 , falls under the definition of term Non-Taxable Income . For example , disaster relief or federal tax refund or child support etc are non-taxable income . See the list of non-taxable income under US tax laws.]

Step 3 : Then deduct above the line deductions from Gross Income. The net balance i,e( Step 2- Step3) is Adjusted Gross Income. 

[ Read more what is adjusted gross income ?  There are a number of tax deductions available to a tax payer as detailed below

  • Tax Deductions for Life-Changing Events
  • Tax Deductions for Families and Parents
  • Tax Deductions for Teachers, Educators
  • Tax Deductions for Employees/Workers
  • Medical Tax Deductions
  • Tax Deductions for Homeowners
  • Charity Tax Deductions
  • Tax Deductions for Car and Travel
  • Student Tax Deductions  ]

Step 4 : Deduct following from Adjusted Gross Income

(i) Standard deduction or Itemized Deductions , whichever is higher.

(ii) Tax exemptions [ Pl. read what is tax exemption and also read what is personal exemption phaseout ? ]

After deducting , both , the adjusted gross income becomes taxable income.

Step 5 : On the taxable income ( step 4) , apply the tax bracket to find out tax payable by you.

Step 6: From tax payable deduct the tax credit available to you.

Step 7 : The balance ( Step 5 – Step 6) is the tax to be deposited .

 

how to do taxes

 

Post Disclaimer

While the information on this site  - Internal Revenue Code Simplified-is about legal issues, it is not legal advice or legal representation. Because of the rapidly changing nature of the law and our reliance upon outside sources, we make no warranty or guarantee of the accuracy or reliability of information contained herein.

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  • Tax Rates 2023
    • Pension Plans Limits 2023
    • Estate & Trust
    • 2022 Tax Brackets
      • USA State and Local Taxes
      • EIC Table 2023, 2022
    • Tax Bracket 2021
    • Tax Brackets 2020
    • Tax Bracket 2019
      • Long Term Capital Gains Rate- 2019,2018,2017
      • 2019 & 2018 Standard Deduction
      • Kiddie Tax Brackets
    • Depreciation MACRS Table
  • Tax Information
    • Latest Phone number of IRS
    • Local Taxpayer Advocate Service Office
    • Search CAA & AA
  • Tax Calculator 2022 & 2023
    • Fastest Sales Tax Reverse Calculator
    •  EITC Calculator 2022 & 2023
    • SEP-IRA Calculator
    • Penalty Calculator
    • IRA Contribution Limit Calculator
    • Mileage Reimbursement Calculator
    • Net Investment Calculator
    • Alternative Minimum Tax Calculator for 2017 & 2018
    • Estimated Tax Penalty
    • Section 179 Deduction
    • tax residency
      • Physical Presence Test Calculator
      • US Tax Residency Calculator
      • First Year Choice Calculator
    • Capital Gains Calculator
    • Home Office Deduction Calculator
  • Write to me
  • Q&A
  • State and Local Taxes
    • California Tax Calculator With Tax Rates
    • DC Tax Rates 2022 & Past Years
    • Massachusetts tax calculator
    • Illinois tax calculator with tax rates
    • Indiana Tax Rate Chart
    • NY State Tax Rate 2022
  • Privacy Policy
  • Guest Posting
  • Lottery Tax Rates by State
  • Test of calculator

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