Accounting and Finance Foundations

Unit 9

Accounting and Finance Foundations Unit 9: Taxes 706

The money withheld from an employee’s paycheck during the year is an estimate of how much tax the

employee will owe at the end of the year. If the total amount of tax withheld from the employee’s pay is less

than what s/he owes, then s/he will need to pay additional tax to the government at the end of the year. If

the amount withheld from the employee’s pay is more than what s/he owes, s/he is due a refund from the

government at the end of the year.

As we discussed earlier, you must complete a tax return to determine if you owe additional money or if the

government owes you a tax refund. If your taxable income is less than $100,000, you can use a tax table to

find the tax. You can find each year’s tax table in the IRS’s official instructions for preparing different types

of tax returns. For instance, this year’s instructions for filing a 1040EZ tax return (http://www.irs.gov/pub/

irs-pdf/i1040ez.pdf) include the most current tax table (pages 31-39).

To read a tax table, find your taxable income in the “At least” and “But less than” columns. Then, read

across that line to the column that shows your filing status. The amount listed where the line and column

meet is your tax. Let’s use the following excerpts from a recent tax table to determine the refund due to

each taxpayer in the examples below.

Examples

1. Marty is single and had a taxable income of $13,210 last year. Use the tax table provided to
   determine Marty’s total income tax due. If his employer withheld $2,350 in federal income
   taxes last year, is Marty due a refund, or does he owe more taxes?


2. Vicki and her husband are filing jointly. Their total taxable income last year was $23,658.
   Use the tax table provided to determine their total income tax due. If their employers
   deducted $4,560 in taxes from their pay during the year, are Vicki and her husband due
   a refund, or do they owe more taxes?

Lesson 21.2 Using Tax Tables to Complete 1040EZ

Taxes

Chapter 21

Student Guide