Nearly 80% of Americans have no clue what their tax bill is going to look like — take these 5 simple steps to get ahead of the curve
It’s well into April — which means you’re likely dusting off your receipts and pay stubs and preparing for a grueling sit-down at the computer with your calculator handy.
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As most Americans well know, preparing your taxes isn’t always simple. Only 22% of adults know how much they’ll owe or receive as a refund on their taxes each year, according to a recent survey from business intelligence company Morning Consult.
It’s better to get ahead of the curve and figure out your finances fast, especially if you’re betting on a nice refund in the coming weeks. Here’s what’s changed and how to determine what your tax bill’s going to look like this year.
Most Americans don’t know what their tax bill’s going to look like
While more than half of taxpayers are anticipating a refund this year, the vast majority have little idea about what their return’s going to look like — in fact, 30% don’t even know whether they’ll owe a bill or receive a check, according to Morning Consult’s survey.
Jean Ross, a senior fellow at the Center for American Progress who focuses on tax and fiscal policy issues, told Morning Consult that the uncertainty is due to “decades of policies layered on to one another,” and federal aid changes in the last couple years.
“I think some of that lack of predictability reflects the big changes that were made during the pandemic,” she says.
Ross explains that most people who haven’t experienced major life changes with significant tax implications, like growing your family, are more likely to withhold the correct amount of tax.
Contributing to smaller refunds this year is the fact that many benefits that were implemented during the COVID-19 crisis, like stimulus checks and the expanded child tax credit, have now expired. The IRS has already warned taxpayers that means supersized refunds are now a thing of the past for many.
The tax agency is also cautioning that some refunds may take longer to be processed, and you shouldn’t count on receiving yours by a specific date in order to pay off a big purchase or bills.
That said, 3-in-10 of those expecting a refund this year told Morning Consult they’re still counting on their checks to cover basic necessities, like groceries and housing. Which should only drive home the importance of accurately predicting your tax liability this year.
Read more: Earn extra cash for your weekend with these quick money hacks
Determine how much you owe
Exactly how much you owe Uncle Sam each year depends on factors like your income, filing status and age.
You might be eligible for special tax breaks if you’re a senior citizen or a young adult, and you’ll likely benefit when you file jointly with your spouse compared to filing separately.
Those who belong to higher tax brackets will end up owing a bigger percentage of their earnings. Here’s how that works for the average single taxpayer: they’ll pay 10% on the first $9,950 of taxable income; 12% on the next $9,951 to $40,525; 22% on the next portion, up to $86,375; and so on. The highest of the seven current brackets taxes any income portions over $628,301 at a 37% rate.
Your employer should provide your W-2, or your annual "wage and tax statement," in time for tax filing season.
Every time you get a paycheck, your employer withholds (or sets aside) taxes based on the information you provided on your Form W-4 when you first started your job. This form provides financial details that help your employer deduct the correct amount of federal income tax from your pay.
When any big changes happen in your life — you get married, have a child or get a big raise, for example — you’ll need to update and resubmit your W-4 to your employer so your paychecks can be adjusted accordingly.
You’ll also need to report any income from other sources, like from your side hustle or interest on a savings account, on a 1099 form.
And if you’ve got a more complicated tax situation or you’re not sure where to start, you may want to turn to a tax professional for help.
Calculate this year’s refund
If you’re anticipating getting a refund this year, it’s either because you overpaid your taxes last year or because you qualify for some sort of refundable credit, like for heat pumps or child care.
When you’re filing your taxes, you’ll want to look into any potential deductions you can claim — whether that’s for housing expenses, retirement contributions, student loan interest or charitable contributions — to either lower your bill or boost your refund.
Low to moderate income earners may receive up to around $6,935 if they qualify for the earned income tax credit as well, depending on their number of dependents. A single person with no children can receive as much as $560.
Take advantage of an online tax calculator to estimate your refund amount, especially if you’re using the software to file. Just make sure you’ve gathered all the necessary documents to input your information correctly.
Refunds typically arrive within a few weeks after filing, but you can check the status of yours using the IRS’ Where's My Refund? tool — you’ll just want to give it 24 hours after e-filing or at least four weeks after you’ve mailed your paper return.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
