How to Calculate Federal Income Tax Liability
It is easy to calculate Federal income tax liability by finding a free online tax calculator. The calculator has different fields to complete in order to generate the liability number. If the number is less than the individual’s withholding amount a refund is due. If the number is higher, the individual must send a check to the Internal Revenue Service (IRS).
- Use a search engine to find a website that has a free online tax calculator. Click the link on the website to load the calculator. Make sure the calculator uses the current year calculations before you type in any information.
- Select your filing status to begin using the calculator. Complete the section on exemptions and then type in the income you earned from your employer into the appropriate field. Put in the amount of the interest and dividends you received during the tax year. Continue to type in your income sources and then move on to the Adjusted Gross Income (AGI) section.
- Complete the AGI section which includes items such as student loan interest and retirement account deductions. The calculator will total up your information and show you an Adjusted Gross Income figure. Go to the Tax and Credits section to continue working on your tax number.
- List the total of your itemized deductions such as property taxes and mortgage interest if you are not taking the standard deduction. You should see your Taxable Income once the calculator analyzes your information. Fill out the Other Taxes and Payments section to find out your Federal tax liability.
- Determine whether you are getting a refund or if you owe money to the IRS. If you owe, make sure that you write out a check to the IRS and attach it to your tax return when you mail it in. Look for a refund check from the IRS if you are due one and make sure it matches your calculations.