How Do Income Taxes Work?
When you get your paycheck at the end of the first pay period at a new job, it’s always interesting to see your net pay. Most of us expect more than we get. By the time you get your check, it has been cut up like a pizza, with several entities taking a piece of the pie. The entities that take money differ from person to person, company to company and state to state. However, almost every income earner has to pay federal income tax.
We generally don’t think much about taxes except during the annual tax season. It’s probably the most dreaded time of the year for millions of Americans, yet we circle it on our calendars along with holidays and birthdays. But little joy is connected to April 15, which is the deadline for filing tax forms. (This deadline doesn’t always fall on the 15th. For example, in 2006, April 15 fell on a Saturday, so Americans got an automatic two-day extension on tax-filing.)
The American tax system is a huge machine with a tax code that seems more complex than rocket science. In this article, we will examine how individual income taxes work, take a look at the history of income taxes in the United States and consider two alternative tax plans that are often discussed.
What is my Tax Bracket?
Need help figuring out your 2010 income tax bracket? You’re not alone.
With the IRS and Congress constantly tinkering with the tax code, it’s sometimes difficult to know what tax bracket you’re in, and what tax rates you’ll be subject to when April 15th rolls around.
Here’s your chance to plan ahead and find out how your taxes may changed from the 2009 tax year. After all, the more you know about your taxes, the better off you will be when it’s time to file. Note: these 2010 tax brackets are for planning purposes only.
To access these tables, please select your filing status below.
- Single 2010 tax rates for all individuals filing single.
- Joint Married Rates for married couples filing one tax return.
- Married Filing Separate 2010 tax bracket for married couples filing separate returns.
- Head of Household Current rates for individuals filing as Head of Household.
Is There an Age Limit on Dependents?
A person of any age can qualify as a dependent (just not a dependent child). There is not really a difference for purposes of the deduction. However, a dependent who is not a child, must make less than $3300 in gross income for the year to qualify (some exceptions for those permanently and totally disabled).
If I claim my daughter as a dependent because she is a full-time college student, can she claim herself as a dependent when she files her return?
If you claim your daughter as a dependent on your income tax return, she cannot claim herself on her income tax return.
If an individual is filing his or her own tax return, and the individual can be claimed as a dependent on someone else’s return, the individual cannot claim his or her own personal exemption.
In this case, your daughter should check the box on her return indicating that someone else can claim her as a dependent.
What should I do if I made a mistake on my federal return that I have already filed?
It depends on the type of mistake that you made. Many mathematical errors are caught in the processing of the tax return itself. If you did not attach a required schedule the service will contact you and ask for the missing information. If you did not report all your income or did not claim a credit, you are entitled to file an amended or corrected return using Form 1040X, Amended U.S. Individual Income Tax Return.
What are the tax changes for this year?
For highlights of any tax changes for the current tax year please refer to the “What’s New” section of the following: