The Two Main Ways to Calculate Individual Federal Income Tax
Easy Tax Computation
Individual Income Tax
Individual income tax can generally be calculated in two ways, depending primarily on your income. For us common folk, there is the yearly tax table, founded, amended, and wholly endorsed by our beloved government and, for those "fortunate" enough to have an income under 100,000 dollars. Then there is the "tax computation worksheet" guaranteed to make you squirm for those that make over 100,000 dollars.
How much tax you may pay is an entirely different story. That depends on your filing status, your deductions, your tax credits and your exemptions. In other words, how much of your income will end up taxable. For instance, your gross income could be over 100,000 dollars, but your taxable income could be well below 100,000 dollars. In that case, you would still qualify to use the tax table. Either way, the government will get their money!
Tax Tables representing the federal tax rates relative to specific tax brackets. You'll find rates for single, married filing jointly, estates and trusts, and corporate rates, based on your filing status. Standard deductions and capital gains rates a
Alternative Minimum Tax
The difference between using these two tax methods is primarily the tax bracket you find yourself in. The highest tax bracket you will be in using the tax table is approximately 22.5%. While high, it could be worse. You could be in the 35% tax bracket that using the "tax computation worksheet" could put you in. Of course, don't forget the state taxes and the local and excise taxes that many states charge you. The only defense that you have against the IRS is a good tax preparer. Be prepared and take advantage of all the tax benefits that are allowable.
Alternative Minimum Tax
The alternative minimum tax is one more way to calculate your taxes. The regular tax law may exclude certain kinds of income, such as small business income for individuals, and it also may provide deductions and credits for certain expenses associated with the operation of a small business.
The IRS will always make sure that it receives as much as one's income as it can get. Enacted by Congress in 1969, the alternative minimum tax (AMT) attempts to ensure that individuals and corporations that could benefit from certain deductions and credits pay at least a minimum amount of tax.
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The Beatles: Taxman
This Beatles song is one of my favorites, although I cannot think of any Beatles' songs that I do not like. Back in the day, the Beatles claimed that 95% of their income was given to their government for their fair share of income taxes. i have no way to verify the accuracy of this claim, but this song alludes to their attitude about taxes.