Meet Ray. Ray's an incoming senior at state university who just finished up a summer internship at corporate Co. Ray had a great experience and also made a lot of money. This is great news, but there is one problem - Ray has no idea how to pay his taxes or even if the money he made requires him to do so. What should Ray do? Well, we've got him covered. Let's start with the basics - how does the US tax system actually work? Hangar taxes is a lot like filling up a line of progressively larger buckets. Each bucket corresponds to a specific tax rate, like 10 percent, and to a specific range of income, like zero to $9,225. As your income grows, you fill up more and more of these buckets, called brackets, each one with its own tax rate. In addition to this, you'll also need to pay what's called a FICA tax, which is the flat 7.65 percent tax on any money you've earned. Sounds simple enough, right? Well, unfortunately, taxes in real life are a bit more complicated. So, let's use a more detailed example. Let's say Ray made $30,000 last year. That's his gross income, literally the amount of money he made at Corporate Co. before taxes. This number can then be refined into what's called AGI by subtracting certain expenses called adjustments, also known as above-the-line deductions. For example, if Ray paid $1,000 in combined student loan interest, his AGI would move from $30,000 to $29,000. This number can be then lowered even further if Ray takes an exemption. An exemption is a flat $4,000 reduction in AGI available to each taxpayer for himself, his spouse, and each one of his dependents. For example, if Ray takes his exemption, his AGI currently at $29,000 will...
Award-winning PDF software
Video instructions and help with filling out and completing Form 2350 Recommended
