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Summary of Chapter 7

In Chapter 7 of the Free Tax Course we learned the followings.

  • The amount of your tax usually depends on the amount of your taxable income and your tax filing status.
  • If your taxable income is less than $100,000 use the Tax Table to figure out your income tax. If your taxable income is $100,000 or more use the Tax Computation Worksheet for your filing status.
  • You are expected to pay at least 90% of your income tax liability as you receive income during the year.
  • Withholding is one way income tax is paid as it comes due. The payer withholds tax payments from your income and sends these to the IRS. The most common type of withholding is from your pay by your employer.
  • The amount of your pay and the information provided on Form W-4 determine the amount of tax your employer withholds.
  • Withholding from your pay is mandatory. you generally do not have the option of having no tax withheld fro your pay. You can choose to have income tax withheld from other types of income such as unemployment compensation or social security benefits.
  • If you do not have enough tax withheld to pay your tax liability, you have to pay the difference with your tax return. If the tax withheld is more than your tax liability, you are due a tax refund of the overpayment.

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