How to Calculate Your Tax Refund
When tax season nears, it is common for taxpayers to wonder how much they can expect to be sent to them from Uncle Sam. However, many taxpayers are unfamiliar with how to calculate their tax refund. Therefore, today we are discussing how to calculate your tax refund.
Check Your Withholdings
If you are an employee, there is a large portion of your salary that you do not receive when your check is cut. Instead, your employer withholds money to give to the government so they can be positive that you will pay them their money. However, when your employer withholds this money they are just estimating how much money you will have to pay in taxes based off your W-4. Additionally, you have to keep I mind that your employer not only withholds money for your federal taxes but they hold money for Social Security Taxes, State taxes, and Medicare taxes too.
Calculating Your Tax Refund
When it comes to your tax refund, this is determined by comparing your annual income to the amount of money that your employer held for federal taxes. Usually, the amount withheld is greater than what you owe, so the difference is the amount that you will receive in your refund.
While it is nice to receive a large refund during the tax season, it also means that more than likely your W-4 is not filled out correctly. Therefore, all you are doing is letting Uncle Sam have a no interest loan with your hard-earned money. It is suggested that you reanalyze your W-4 if you are receiving large tax refunds.
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