Simple Tax Scenario Planning

Most people only “study” their taxes one day a year and then they really don’t know what happened.  In the end a tax program such as TaxAct (not to be confused with TaxSmack) spits out “YOUR REFUND is $3210!”  There’s probably not 1% of tax payers who truly understand where that number came from other than they entered their W2 and 1099 data and answered TaxAct’s queries as best as they could.  

Unfortunately Tax Planning software like TaxAct or TurboTax aren’t very amendable to looking at alternative scenarios — some things you might be considering during the year like taking a second job (income) or the impact of a second job (expenses but also some tax savings).

TaxAct has a user-friendly but also fairly sophisticated calculator that accounts for most (but not) of the tax gotchas such as phaseouts, AMT, and nonrefundable credits.  It automatically calculates the two most important tax credits — the child tax credit and earned income credit.  Again, it doesn’t go through a complete vetting process so be careful to not take the results as tax gospel.

Here are several scenarios that I set up in TaxAct’s calculator.  Check out those that may apply to your situation and then try out the calculator at https://www.taxact.com/tools/tax-calculator.asp

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