While the tax code may seem complicated, the formula for computing your income tax is fairly simple. You don't have to wait until the end of the year to determine your tax liability (what you'll owe). Once you know your total income, deductions and credits, you can compute your tax liability in minutes.
Download an IRS 1040 Form.
Determine your filing status and exemptions. These may include yourself, your spouse and any dependents.
Determine your total income. This will include all sources of income such as your salary, tips, fringe benefits, alimony, welfare benefits, unemployment benefits, dividends and more. Refer to IRS Publication 525 or IRS Tax TIP 2009-25 for a complete list of taxable and non-taxable income.
Subtract your exemptions, deductions and adjustments from your total income to get your taxable income.
Refer to the 2009 IRS tax tables to determine your income tax liability for your taxable income.
If you qualify for any tax credits, deduct them from your tax liability.
- If you have any doubts about your taxes, refer to a tax professional to maximize your deductions and credits.
- If you decide to itemize, make sure that the itemized amount is greater than the standard deduction since you cannot take both.
Items you will need
- Earnings statements (including child support, alimony, interest and dividends)
- IRS Form 1040
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