Understanding your own taxes is part of being an American. There is no excuse and no way around it. You also need to check your tax calculation to see if it is correct. The tax calculation is what is used to create your tax bill. If it is incorrect then you are going to end up paying more or less than you desire. Your tax calculation and following bill will be sent to you as a “Self Assessment Statement”.
The letter that you receive
The tax calculation that is sent to you will show you any changes made to your tax return. The tax year will be denoted within the calculation. The letter you receive will say something such as, “Total Income Tax Due”. It will explain that it has been calculated for the tax year and that the figures have been gathered from the accompanying calculation pages. The letter will also show you any advance payments you have made, and any “payments on account” that you paid to lower next year’s bill.
Why check your tax calculation?
You need to check it to see if there are any points that you disagree with. If you do then you need to inform the tax department. The tax calculation letter will have a number on it that you can call if you disagree with any points on it. If your calculation is wrong then you may end up paying too much tax or too little. Too little may seem like a good thing, but it is going to cause you big problems if you are audited. The tax department are within their rights to charge you interest and give you penalties if you do not pay enough tax.
What to look for on your tax calculation form
It is going to show you your tax calculation pages. It will show you how much of your gross taxable income is going to go towards taxes. The gross amount is the figure before any taxes are deducted.
It is going to show you your salary after they have deducted any allowable expenses that you have decided to claim. It will detail all of your taxable expenses and any benefits you are claiming. If you are a self-employed person then you have to show your profits too. It should also detail investment information too, such as savings interest and dividends.
Your taxable income is within your tax calculation.
Your total taxable income will be shown on your tax calculation, which is created by taking off any of the items mentioned above, from the gross amount. At this point your total tax due for the year will take account adjustments into consideration. For example, if you have your tax paid through a PAYE (Pay as you Earn) tax code, then the money paid already will be deducted from the amount you owe. You will also have your savings income deducted tax taken from your final amount owing. Finally, they will consider any refunds that were given throughout the year.
Additional information to be found on your tax calculation
You will also be able to see your Capital Gains Tax and your repayments for student loans. You will also receive a cover letter with your tax calculation. It will show you the final date, when all of your tax must be paid. You will also see any further details regarding your payments on your account that must be paid within a certain time limit.
Once you have received and checked your tax calculation
It is up to you to check your own tax calculation. It is also up to you to pay the tax bill that you receive. If you do not then you will end up being charged interest for late tax payments. If you try to manipulate the numbers then you will be severely punished during your next audit, which may result in prison time. In many cases it results in hefty fines that far outweigh any possible tax evasion benefits you may have had.
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