35 - liability than is actually due Sometimes taxpayers...

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40. When taxpayers file a tax return, they will either pay an additional amount or receive a refund of excess taxes paid. Briefly explain how this “settling up” process works. Why might a taxpayer pay too much during the year? Answer: When a tax return is filed, the taxpayer determines the total amount of tax liability. Normally, during the year, taxpayers pay this liability to the government through income tax withholdings. These withholdings (or other payments) are an estimate of the total tax liability that will be due at the end of the year. There will almost always be a difference between the actual amount due and the amount estimated. The amount due or overpaid is determined when the final tax return is filed. A taxpayer will pay too much during the year if he or she estimates a higher tax
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Unformatted text preview: liability than is actually due. Sometimes taxpayers choose to pay “too much” as a method of forced savings. 41. Cameron is single and has taxable income of $42,443. Determine his tax liability using the Tax Tables and using the Tax Rate Schedule. Why is there a difference between the two amounts? Answer: Cameron’s tax using the tax tables is $7,030. His tax using the tax rate schedules is $7,034.50. There is a difference between the two amounts because the tax tables are based on taxable income at the midpoint of the range. Thus, the tax tables are based on a taxable income of $42,425 while the tax rate schedules are based on taxable income of $42,443....
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This note was uploaded on 09/16/2011 for the course ACCOUNTING 145 taught by Professor Eric during the Spring '11 term at Palm Beach Community College.

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