How to Calculate Federal Income Tax for 2011, 2012

Federal income tax is calculated based on the formulas established by the Internal Revenue Service according to the Internal Revenue Code, which is the tax law passed by Congress and updated from year to year.

For most taxpayers, the calculations are fairly simple. If you do not report business income, and use the standard deduction for all taxpayers, rather than itemizing your deductions, you may use a tax return calculator and input a few simple items of information to determine the tax you owe:

• Age
• Filing Status (married filing jointly or separately, single, or head of household)
• Number of Dependents
• Other exemption items, i.e. for disabilities such as blindness
• Wages or Salary for the year
• Other Income, such as retirement benefits, interest and dividends, alimony, etc.
• Non-itemized deductions, like IRAs or other retirement savings
• Any tax credits

Unfortunately, the tax code has become very complex. Once you come to the determination of your dependents and the other items, there are IRS rules to follow. Fortunately, with a good tax calculator like TurboTax, there are step by step instructions that walk you through each of these steps.

Also, for most income and deduction items, wages, salaries, interest, dividends, etc., you will receive a year end tax statement, usually in the form of a W-2 or 1099. These are documents the payer is required to send to you, so you do not have to produce or calculate them yourself.

Also, for many of the deductible items, like an IRA, you will also receive a statement from the custodian of the account, which tells you how much of a deduction you will be entitled to.

In the end, all you need to do is gather a few records then go to the tax calculator at TurboTax Online, where the calculation will be done in a matter of seconds. Then you will know if, or how much of a refund you can expect to receive.