Tax Brackets: What might you owe and how will you pay for it?
Here’s the ultimate tax bracket Q&A for tax season, the least wonderful time of the year!
Q: What are tax brackets?
Answer: According to Bankrate.com, “Taxpayers fall into one of seven brackets, depending on their taxable income: 10%, 12%, 22%, 24%, 32%, 35% or 37%. Because the U.S. tax system is a progressive one, as income rises, increasingly higher taxes are imposed. But those in the highest bracket don’t pay the highest rate on all their income. For example, in 2018, single individuals pay 37% only on income above $500,000 (above $600,000 for married filing jointly); the lower tax rates are levied at the income brackets below that amount, as shown in the table above.”
Q: How much will I get in tax returns?
A: It’s hard to determine how much each person will get for their tax returns — or if they’ll even get tax returns — as this is based on every unique situation. Remember that your tax bracket, income, and marital status are some of the things you’ll get in return, but you can get an estimate on what that chunk of money will look like through online tools like the TurboTax Income Tax Calculator.
Q: If I owe taxes, how do I pay for them?
A: Even though owing taxes is not the end of the world, it can definitely be stressful if you’re not sure where that money is going to come from. The IRS offers several federal tax payment options, but you should always try to think of a solution that won’t get you further in debt for a long amount of time. For instance, staying away from paying with your credit card is probably smart as you won’t accrue more debt and high-interest rates. A smart way to pay for your taxes could be a personal loan.
Q: Should I hire an accountant?
A: It’s hard to answer this question as each unique situation will determine the amount of help you need doing your taxes. A few cases in which you will thank yourself for hiring a professional are:
- When you own your own business: Being an entrepreneur is anything but easy, but you already knew that. What you might not know, however, is that an accountant will help you separate personal from business taxes and determine how much you should pay for your quarterly estimated tax payments.
- If you bought a new home: Having a new place to call home is definitely an adventure most adults dream about. A dream that might turn into a nightmare, on the other hand, is filing taxes on your own after buying new property. Let a CPA show you how to take advantage of every benefit available to you and help you determine how to adjust your withholdings
- After a major life change: Did you get married or have a new baby? Congratulations! As wonderful as these life changes can be, they can also make filing your taxes a bit more complicated, so definitely talk to a CPA if any of these apply to you.
- Failing to pay your taxes in the past: The Balance explains that “If you have not filed your taxes in the past, then you should reach out to a professional for help. A tax accountant can help you file several years’ worth of taxes and may know of programs offered by the IRS for people in this situation. The IRS may be willing to set up a payment plan and it helps to have an accountant work on your behalf to make sure everything is filed correctly as you attempt to rectify the issue of failing to pay your taxes in the past. You may also want to contact a tax attorney when you do this.”
If you’re definitely not using an accountant, take advantage of technology that allows you to file your taxes without having to print a single document.
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