Tax question, maybe someone can answer

[Kaervak]

Don't know if this is true, but is there a certain amount of money you have to make before you have to pay tax on it? I'm currently looking at the IRS site, but haven't found anything yet. Thanks.

Also, does anyone know what the current income tax rate is? It's either 15 or 10 percent, but I can't get a straight answer from the IRS site.

 

[Bleep]

Yes there is a amount of money that triggers income tax. Here is how it works you make some amount of money--you have deductions--standard deduction depending on your filing status. When your income excedes your deductions you start paying tax.

Bleep

 

[woodie1]

Taxes can get rather complicated. There are a lot of variables involved. Below are figures for a single taxpayer from the 2002 Estimated Tax for Individuals Form 1040-ES/V-

Standard Deduction for Single taxpayer = $4,700
Personal Exemption = $3,000
So basically if you make $7,700 or less there is no tax due. If Tax was withheld file for a refund.
On income above $7,700 here is the Tax rate Schedule for a Single taxpayer:
$0 to $6,000 pay 10%
$6,000 to $27,950 pay $600.00 + 15% of the amount over $6,000
$27,950 to $67,700 pay $3,892.00 + 27% of the amount over $27,950
$67,700 to $141,250 pay $14,625.00 + 30% of the amount over $67,700
$141,250 to $307,050 pay $36,690.00 + 35% of the amount over $141,250
$307,050 to ........ pay $94,720.00 + 38.6% of the amount over $307,050.

Hope I didn't make a typo.

 

[vi edit]

Mind if I hijack your tax thread with my own questions?

I've got two questions -

1) is there two parts of what what I'm responsible for in paying taxes? I fall in the $27k-$63k(or whatever it is) tax bracket. Am I required to pay a flat amount of like $3500 and then 27% of ever dollar over $27,000? Or do I just pay 27% on every dollar over $27,000. I am confused as to what the $3500 "standard deduction" meant.

2) What is the advantage/disadvantage of filing head of household?

 

[wyvrn]

Standard deduction means deduct that amount from your taxable dollars, it's in your benefit. In other words, the first 3500 is tax free. After your standard deductions (there can be more, especially if you have kids and a house), you pay the percentage for your tax bracket. If you made 30,000 as a single, it would look like this:

0- $7700 = no tax
7701 - 27,950 taxed at 15% rate
27,951 - 30,000 taxed at 27% tax rate

 

[JOSEPHLB]

sounds accurate..

another thing.. if you win the lottery... I think they get around 45-47% of it.. I believe.. correct me if I'm wrong..

freaking half of it GONE

 

[FeathersMcGraw]

Originally posted by: vi_edit
1) is there two parts of what what I'm responsible for in paying taxes? I fall in the $27k-$63k(or whatever it is) tax bracket. Am I required to pay a flat amount of like $3500 and then 27% of ever dollar over $27,000? Or do I just pay 27% on every dollar over $27,000. I am confused as to what the $3500 "standard deduction" meant.

2) What is the advantage/disadvantage of filing head of household?

Disclaimer: I am not a tax accountant.

A deduction reduces your taxable income. Say you make $30000 (gross) a year and the cutoff for the lowest 15% tax bracket occurs at $28000, with the next higher bracket taxed at 27% (I am making all of these numbers up). A single $3500 standard deduction reduces your $30000 taxable income to $26500, which means that all of your taxable income falls within the 15% bracket. If you were making $33500 a year, that standard reduction would reduce your taxable income to a round $30000, which means you pay 15% on your first $28000 of income, and 27% on the amount over that cap (in this case, $30000 - $28000 = $2000).

The "standard deduction" is just the deduction that everyone who files taxes gets. Obviously, there are other deductions laid out in the tax code (capital losses, mortgage interest payments, etc.)

"Head of household" doesn't mean anything if you're single, but if you have a family, it means that you can claim additional standard deductions for dependents (such as a spouse filing jointly or children).

Edit: forgot to explain the "standard" part of "standard deduction".

 

[Taxmeister]

The above info is generally accurate, but, if your income is from a 1099 form, unless its interest income or capital gains, you have to pay the self-employment tax which is the equivalent of the Medicare/ FICA deductions from your regular paycheck. If your only income is from a 1099 and its below the minimum filing threshold, you still will owe some SE tax. You then get a deduction for a portion of the SE tax you owe off of your income taxes but its not a credit, just a deduction. The SE tax maxes out around $80,000 but anything over that is still subject to the 2% minimum SE tax.
As far as lottery winnings go, if you take the lump sum option, which you should do, all of the money will be subject to regular income taxes (but not the SE tax, unless you are a professional gambler) and those top out at 38%. To figure approximately how much you would walk away from at the end of the day, multiply the stated prize amount by .32 and that should get you close, as long as the interest factor for the present value calculation doesn't change too much. So, if I hit Florida's $18 million drawing tonight, I'd walk away with about $5.75 mil. Works for me.

Ted Hudgins, Board Certified Tax Attorney, Naples, FL.

 

[PsychoAndy]

Originally posted by: JOSEPHLB
sounds accurate..

another thing.. if you win the lottery... I think they get around 45-47% of it.. I believe.. correct me if I'm wrong..

freaking half of it GONE

Capital gains taxes are.....well, lets put it this way. I'm kinda glad my income isnt taxable since there isnt much of it.

-PAB

 

[kherman]

Originally posted by: Kaervak
Don't know if this is true, but is there a certain amount of money you have to make before you have to pay tax on it? I'm currently looking at the IRS site, but haven't found anything yet. Thanks.

Also, does anyone know what the current income tax rate is? It's either 15 or 10 percent, but I can't get a straight answer from the IRS site.

I think the question you are asking is, at what income level do you start getting taxed:

Ignoring deducations and all the other intircaccies:
$5000 is the number you are looking for, I think. Try to verify this.

 

[kherman]

My advice, buy turbo tax. Makes these headaches go away!

 

[T2T III]

Originally posted by: kherman
My advice, buy turbo tax. Makes these headaches go away!

While I will agree with you, I still think people need to know a little about taxes before they just plug some information into an application, print the forms out and file their taxes. I have quite a bit of experience from extensive reading and doing my returns for the past 20+ years. However, I used Turbo Tax this past year and the application failed to print out my Schedule D. Unfortunately, the IRS caught the issue and wanted me to pay them $199.##, which is what they figured that I owed them. I was able to get the Schedule D out of Turbo Tax and fax it to them. They, then cancelled their action that they were going to take against me and collect the money.

Morale of the story: know enough about taxes so you don't get the wool pulled over your eyes by the Guv'ment.

 

[dquan97]

Before filling out taxes by yourself using a tax software like TurboTax, I would recommend doing the 1040 form by hand, so you know where the numbers go and how they are relational.

If anyone's interested, I can pull up some scenario questions and give "homework." I'll keep it simple and practical, so I won't be asking about partnerships, 1031 exchanges, real-estate tax, or corporations.