Tax brackets, refunds and what you need to know about them

New FICO system could impact your rating

[ad_1]

rssfeeds.usatoday.com

Tax brackets may be one of the most misunderstood aspects of the tax system — and that can hurt taxpayers.

“In the past three days, I’ve had two people say to me, ‘I have a dumb question: Is it true if I’m right against the tax bracket, and I make $100 more and get bumped into the next tax bracket I’ll pay thousands of dollars extra in taxes?'” says Chris Mulvaney, a tax director at CBIZ MHM. “There is this misperception that all your income will be taxed in the top bracket.”

As that question suggests, many people believe that their top marginal rate reflects the percentage they’ll pay on their entire income. In other words, a single taxpayer with $100,000 in annual income might mistakenly believe that her top marginal rate of 24% applies to every dollar she earns.

But that’s not how tax brackets work. Instead, she’ll pay 10% on her first $9,700 of income, then 12% on income over $9,700; 22% on income above $39,470; and 24% on the portion of her income above $84,200. 

Is your store closing? Pier 1 store closings: These locations are slated to shutter.

Restaurants and coronavirus:Restaurants struggle during fears of outbreak

What you don't know about your tax bracket can hurt you.

In a nutshell, your top marginal rate reflects what you’ll pay on the portion of your income that falls into that top bucket — but your effective rate, or what you actually pay the IRS, is likely to be much lower because of that graduated system.

“With the tax reform in 2018, we have seven brackets that you go up as you go up in taxable income,” says Dina Pyron, global leader of EY TaxChat, a tax-prep service from Ernst & Young.

[ad_2]

Source link

Published
Categorized as Business

By Bernice Caldwell

Bernice is one of the finest authors Industry News Today portal has until now. Bernice's linguistic and well-written technique is one of the plus points that have the readers glued to her articles. Bernice currently heads the Healthcare and Services domain as her knowledge on the medical topics is immense. She has just joined the Industry News Today portal 6 Months back but the love for writing can be very well seen. She may be short on experience but it has definitely not stopped her from presenting some of the finest articles. Bernice is currently a very well-known personality on the portal to have shown her skillful writing in such a limited time span.

Leave a comment

Your email address will not be published. Required fields are marked *