The majority of tax applications or forms result in a tax refund. A tax refund is an imbalance in an individuals tax return and ultimately yields a payment of monies to the individual taxpayer by the Internal Revenue Service. Although the majority of taxpayers have tax questions pertaining to their refund, the calculations associated are fairly simple. When asking how to estimate my tax refund, a taxpayer first must understand where the money is coming from.
All employees pay a large portion of their salary to all forms of government. The percentage of your salary or wages is withheld from your income. The reason for withholding, is that the taxpayer ensures the federal government the payment or fulfillment of taxes.
The number withheld is not the tax rate or amount of taxes, but instead a loan of sorts collected by the government. When the amount withheld exceeds the amount owed by the individual taxpayer, the federal government will offer a tax refund. The employer and the government are withhold not only federal income taxes, but also social security taxes, state income taxes (in the majority of states), and Medicare. Social security taxes are calculated by taking 6.2% of your earnings, and Medicaid is 1.45% of your earnings.
Taking the aforementioned calculations into consideration the tax refund is calculated by comparing your total income tax to the amount that was withheld during the taxable year for Federal income tax. The difference between the amount withheld and the amount of income taxed for a taxable year is the refund obtained. To understand the appropriate amount of taxable income an individual must understand the tax brackets and their standing within them.