I’ve only recently joined the working force, and I am still not sure of this entire concept.
I know I am supposed to go to an accountant and show him a slip from my job for the returns, and also slips from my stocks that show all the net changes.
What I don’t understand is \*why\* I receive a certain amount after doing all of that.
In: 8
Every year you owe a certain percentage of your income to the government. When your employment starts you fill out a form and your employer will withhold some tax from each paycheck. This amount withheld is usually pretty close to how much tax you will eventually owe at the end of the year. Say you made 50k and your employer gives you 40k and sent 10k to the government for taxes. But there is more that goes into how much tax you owe than can be fully figured out with just a short form you give your employer, that 10k amount is a rough estimate. When you actually do your taxes every year, there are things that can add or subtract from your taxes you owe. Maybe you sold some stock and need to pay taxes on that income or made interest at a bank and that needs to be taxed but none was withheld, or you have a child which comes with a tax credit so you owe less taxes or you have student loans and a portion of the interest you paid is tax deductible. There are a good number of things that can impact it, but if you have a fairly normal income situation there aren’t that many and it’s pretty easy to figure this out on your own with the help of some often free online software.
For most people, you go through all the things that need to be added or deducted from your taxable income, and find that you aren’t really adding much or any income, and you have some things you can deduct, so you end up owing less than the 10k in taxes you already paid, so when you file your taxes the government gives you a refund of the difference.
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