How much of your income goes to taxes explained

It’s no secret that a portion of your income is taxed- but do you know how much?

For starters, it depends on the type tax form You have submitted your application.

Form W-4 helps determine the amount of your paycheck to pay taxes


Form W-4 helps determine the amount of your paycheck to pay taxes

If you filed a Form W-4, also known as an Employee Withholding Certificate, this will help determine the amount to be deducted from your payslip for tax purposes.

However, if you are an independent contractor or a freelancer, you may not always have the luxury of that form as well as the taxes automatically being withdrawn from your paycheck. .

With W-4, it is very helpful to get the most accurate filling possible.

Otherwise, you may have to pay the IRS additional money at the end of the tax year and may also have to pay a penalty.

But if too much of your paycheck has been allocated for taxes, you may be able to get a refund.

It’s important to note that any life changes, including marriage, a raise, or a job change, are reasons to update your W-4.

What is my income?

Your W-4 is the biggest deciding factor when it comes to taxes.

This form contains information about your application status, i.e. if you are single, have a spouse or have any dependents.

However, your income also plays an important role, as it determines which tax bracket you fall into.

Your income may be taxed at different rates, under the progressive tax system in the United States.

For example, the lowest tax rate in the 2022 tax bracket is 10%, which applies to single individuals earning $10,275 or less.

For couples filing together, the income amount is $20,550.

The tax rate rises to 12% for single individuals with incomes above $10,275, capped at $41,775, according to CNBC.

What exactly are taxed dollars going towards?

Tax dollars help fund many federal and state programs.

Some of your federal taxes go toward the Federal Insurance Contributions Act (FICA).

This helps support programs that include Social Security and Medicare.

State and local taxes go toward a variety of programs and services including education, healthcare, infrastructure assistance, etc.

We explain when can you file your taxes in 2021.

We also explain How many bank accounts should you have in 2022?.

Money expert reveals how many bank accounts you will need by 2022

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