Federal Income Taxes

A tax return is information that the taxpayer compiles and reports to the IRS on a standardized form

• You are required to file a federal income tax return if your income is above a certain level
• It’s not required, but generally a good idea to file a federal income tax return even if you owe no tax because you can claim a refund for any taxes withheld Most US households file annualy a Federal Income Tax Return on Form 1040. Most modern filers use some software to prepare the return, but you can also get the paperwork from irs.gov.
  

Tax Formula $\text{Gross income}$ $\underline{-\text{Deductions for adjusted gross income}}$ $=\text{Adjusted gross income}$ $\underline{-\text{Deductions from adjusted gross income}}$ $=\text{Taxable income (tax base)}$ $\underline{\times \text{ Tax rate(s) multiplied by taxable income}}$ $=\text{Assessed income tax}$ $+\text{Other taxes and penalties}$ $\underline{-\text{Credits and withholdings}}$ $=\text{Net tax due (or refund)}$

Filing Status §

• Five different filing statuses
• Single
  • Not married
  • No dependent children or relatives
• Married filing separately
  • Must be legally married on the last day of the tax year and choose to file separately
• Married filing jointly
  • Must be legally married on the last day of the year (December 31)
• Qualifying widower
  • Spouse died within the 3 previous tax years and filer has not remarried
  • Support at least one qualifying child
  • In the year of death, surviving spouse files as married filing jointly or married filing separately
• Head of household
  • Not married
  • Support at least one qualifying dependent

Calculating Total Income §

• Gross income: sum of all your income
• Adjusted gorss income (AGI) : amount calculated after the for AGI deductions (expenses allowed by Congress to offset gross income)
• Taxable income: the amount remaining to be taxed after the from AGI deductions (standard or itemized)
  • standard deduction is an amount set by Congress and is determined by your ifling status
  • itemized deductions are specific expenditures that taxpayers can cliam instead of the standard deduction
    • State and local taxes, including property and income tax
    • Medical expenses that are more than 10% of the taxpayer’s AGI
    • Interest paid on mortgage debt associated with your primary home, and
    • Donations to charities.