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Conclusion The 2023 tax system brings updates you need to be aware of, including changes to tax brackets and deductions. Understanding the basics of the tax system will help you navigate the filing process with ease and ensure you pay only what’s required—or claim any refunds due.
Typology: Summaries
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Overview of the Federal Income Tax System
The U.S. follows a progressive income tax system , where tax rates increase as income rises. The federal income tax is collected by the Internal Revenue Service (IRS) and funds various government programs. Your taxable income is what determines how much you owe, after taking into account deductions, exemptions, and credits.
Key Updates for 2023
● Tax Brackets Adjusted : 2023 sees slight increases to tax brackets, which may affect how much tax you owe. ● Standard Deduction Increase : The standard deduction for single filers is $13,850 and for married couples filing jointly it’s $27,700. ● Child Tax Credit : The credit remains in place but with changes in eligibility and phase-out limits. ● Retirement Contributions : Limits on 401(k) and IRA contributions have increased.
How It Affects You
Your tax obligation is based on:
Filing Your Taxes
● Prepare Documents : Gather forms like W-2, 1099, and receipts. ● File On Time : The tax deadline for 2023 is typically April 15th. ● Tax Software or Professionals : You can file using software, hire a professional, or file manually. ● Penalties for Mistakes : File accurately to avoid penalties or delays.