Federal, State and Local Taxes
A fine on goods, services, and income that is allotted to the federal, state, and local governments.
Plan ahead on what you will need to pay and save the needed amount for when it is due.
Only spend the money you will have after subtracting the future taxed money from your income, this will be very helpful in ensuring that you have enough for when they are due.
The money the government collects from your paycheck each year
For single taxpayers if you make under $40,000 per year, you give 12% of your paycheck to the federal government. Likewise people who make under $90,000 pay 22%, under $185,000 pays 24%, under $210,000 pays 32%, and under $525,000 pays 35%.
What does this mean??
Each month your employer will withhold from your pay the income tax money that they estimate you will need to pay according to your wage and tax bracket. They give the withheld money to the federal and state governments.
Before April 15th every year you will file tax returns which tells the Gov. exactly what you received and whether the employer estimated wrong.
If they withheld too much then you get that money back from the government.
If they withheld too little you get a bill from the government that must be paid.
Allowances- what are they?
Tax allowances range from 0-4.
A lower number of allowances means more money withheld each month from your paycheck.
Thus, more allowances means allowing more liquid assets for use in daily life like for your checking account.
W-4 Form: Tells your employer the how correct federal income tax from your pay. See W-4 tax withholding Section for more information.
A W-2 tax form shows important information about the income you've earned from your employer, the amount of taxes withheld from your paycheck, the amount deducted for benefits provided and other information for the previous year.
The W-2 “Wage and Tax Statement,” reports an employee’s income from the prior year, how much tax the employer withheld and other information. Employers send employees the form in January (a copy also goes to the IRS). Employees use the form W-2 to prepare their tax returns.
Your W-2 form tells the IRS how much you earned from your employer in the past year and how much withholding tax you've already paid on those earnings. For many people, the information on the W-2 determines whether they’re getting a refund or writing a check to the IRS at tax time.
You should receive a W-2 from every employer that paid you at least $600 during the year. Tip income may be on your W-2. Freelancers or independent contract workers get a 1099 form from their clients, not W-2s.
Don’t confuse a W-2 with a W-4 that’s the form you use to tell your employer how much tax to withhold from your paycheck at every pay period.
1040 Tax Returns Form
These can be really complicated forms
The 1040 is the IRS official document that U.S. taxpayers use to file their annual income tax returns. It is divided into two sections, one to report income and one to report deductions. These sections determine the amount of tax owed or the refund you should expect to receive.
The IRS website has information on the 1040 form, click here. The incometaxpro.net website has additional helpful information and instructions on how to fill out the form, click here for that information.