Business, Legal & Accounting Glossary
Total tax represent the total federal taxes a specific taxpayer owes in a given tax year. The equation for total tax is:
Total tax
=
Income tax (based on taxpayer’s taxable income)
+
Alternative minimum tax (if applicable)
+
Additional taxes owed (e.g. self-employment tax, IRA or retirement plan tax, unreported social security or medicare taxes, etc.)
–
Tax credits (e.g. education credits, child tax credit, retirement savings contributions credit, etc.)
Total tax is not used to refer to other types of taxes such as sales taxes, estate tax, or property tax. Total tax does not take into account what a taxpayer may have already paid to the US Treasury (e.g. via estimated tax payments or payroll withholding). For individuals, total tax is calculated on Form 1040. To determine whether taxes are owed or a refund is in order, compare total tax to tax payments already made. Estimating total tax is helpful to determine proper withholding and/or estimated tax payments which can minimize tax refund or tax underpayment.
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This glossary post was last updated: 11th August, 2022 | 0 Views.