Tax calculators can be your best taxation friend if utilized smartly throughout the year. You don’t have to prepare an entire tax return in October to try and estimate what the damage is going to be by April. You can actually use freely available taxation calculators that help you identify which tax bracket you’re looking at, as well as deductions like IRA accounts and how it impacts your taxable income.
However, free tax calculators may have limited functionality, so you could consider using a tax app to help you further. Some of these apps have a free trial period, so you can make sure it is the right fit for you before paying a cent.
With only 1-month left of 2017, now is the time to start some smart tax planning before you’re pressed for time with nowhere to go. The first part of the process is getting a quick estimate on how much in taxes you’ll owe and whether you can expect a large tax refund. Like courses in school, the more homework and studying you put into the process now, the better you’re score is going to be by April.
What Will I Owe in Taxes?
The first part of the taxing process is figuring out what your total taxable income is going to be for federal calculations. Tax calculators can help you identify your estimated gross income, using family information for choosing the correct tax liability. When you look at an example of a married individual with one child and a total income of $50,000, you can see the effects of shielding part of that income come tax time. If that person contributes $3,000 to a 401K at work, taking the deduction, they can plug these figures into the calculator and find that the taxable income after the deduction and personal exemptions results to $22,150. The total is $2,390 in income tax.
Basic tax calculators can also help higher-income individuals with potential reductions in itemized and personal exemptions. Most of them aren’t able to handle intricacies of investment income that’s taxed at a lower rate, but it’s still a really good starting point.
Check out this tax-planning calculator.
What Will My Refund Be?
Now that you have a good idea on the planning and configuration part of the process, the next step is estimating that glorious tax refund. A great calculator for this type of information is available through CalcXML. By using it, you can determine whether you might receive a tax refund or still owe additional money to the IRS.
Once you have your estimates, the next thing you want to do is think about your finances. If you’re not satisfied with the outcome, it’s time to consider different payments being made into your 401K, as well as the amount that is being withheld from each of your paychecks throughout the year. Lastly, if you’re going to owe money, arrange to have your withholding boosted for the last few months of the year.
It might seem a bit early for you to sit down and talk tax time. No one wants to do it, which results in procrastinated tax prep that will miss the finer details.
Take the time now to use tax calculators and tax apps to really come up with your strategy for your 2017 federal taxes.