Sometimes I see on American TV that once a year (I think) they try to figure out how much tax they owe and send off a cheque. How does this really work?
Id struggle very much to calculate this. Do you keep receipts for everything?
Is there no system where taxes are automatically taken out of your monthly wages? Id be interested to hear some examples of what you pay, and how you calculate it all if possible.
In the UK pretty much every has monthly tax taken automatically, unless you are self employed.
The way it works for me for example last month I made:
£2282.58 and £435.92 was deducted. £247 in tax and 98.77 national insurance. £90.15 went to my pension.
So what would your payslip look like? No deductions? Or am I just getting the wrong idea from America TV shows?
Thanks
Wage workers fill out a form with their employer called a W-4 that lets the employer determine the appropriate amount to deduct in tax and pay to the IRS for you.
Many people have additional sources of income though, some of which will pay tax for you, some of which do not. Each Year when you ‘file’ your taxes you gather all that information together and pay any outstanding balance. (or receive a refund for overpayment). The form is called a 1040 and comes with a workbook that walks you through everything. It includes very large tables where you can look up the tax amount to avoid having to calculate it as well. If your tax situation is fairly straightward an eighth grader could probably do it.