How is tax liability calculated? Need help

C

calar pipe

Member
I’m trying to better understand tax liability and how it’s actually determined. I often see the term on tax forms, but I’m unsure whether it refers to the total amount owed before deductions or just the remaining balance after payments.

A few specific questions I have:
  • Does tax liability cover only federal taxes, or does it also include state and local taxes?
  • How do factors like self-employment income or investment earnings affect total tax liability?
  • If I’ve had taxes withheld throughout the year, how can I determine whether I still owe additional taxes?
I’d really appreciate a straightforward explanation or any simple examples that could help me calculate this correctly
 
Self-employment taxes hit DIFFERENT. If u r freelancing, factor in 15.3% for Social Security & Medicare ON TOP of your regular income tax. Always set aside at least 25-30% of what you make. Trust me i learned the hard way.
 
It includes federal, state, and local taxes if applicable. Your tax liability is basically what you owe based on your taxable income, including wages, self-employment income, and investments. Deductions and credits may help reduce it.
 
Basically your tax liability is the total amount you owe to the IRS before accounting for payments like withholding or credits. It includes federal but you also have separate liabilities for state and local if applicable.
 
Self-employment income adds to your taxable income and requires you to pay both the employer and employee portion of FICA. So yes, it increases your liability significantly unless you deduct well.
 
Tax liability = the total amount you owe the IRS before applying payments like withholdings or credits. Think of it as the bill before you've started paying it down
 
As someone who freelances, let me tell you....tax liability hits hard if you don’t do quarterly estimated payments. I got wrecked my first year. Don’t be like me. Budget like 25-30% of all income for taxes if u r self employed.
 
Self-employment income hits different. You pay both the employer and employee side of Social Security + Medicare. that’s on top of income tax. so yeah being your own boss comes with a tax sting.
 
Your tax liability is the amount the IRS says you owe before subtracting what you've already paid like withholdings, estimated payments. If you paid more than your liability, u get a refund.
 
Liability = what you owe. Not what's left after you've paid. It’s like the bill at a restaurant. Doesn't matter if u already handed over a gift card, the full bill is the liability.
 
Wait, so if tax liability is what u owe, then why do tax forms show "Total Payments" as a separate thing? seems like they could just tell u the net and be done with it.
 
Here’s the flow:
  1. calculate total income
  2. subtract adjustments and deductions = taxable income
  3. apply tax rates = tax liability
  4. subtract credits = final tax owed
    then compare to what u already paid
 
Totally get where you're coming from. i was super confused too until I did my taxes manually one year just to understand what was going on. TurboTax made it too easy to not think.
 
To add to what others said, use IRS Form 1040 as your roadmap. Your liability is usually on Line 24 (total tax). Then subtract how much u already paid via W-2 withholding or estimated payments.
 
As someone who’s self-employed, my tax liability was a rude awakening. I didn’t realize self-employment tax was on top of income tax. Set aside 25-30% of everything you earn, trust me.
 
Tax liability is basically the total amount you owe the government before any payments like withholding or estimated tax. Think of it as the bill for your income. If you’ve already had taxes withheld, those reduce what you owe. If you paid too much, you get a refund.
 
If u r self-employed, don't forget about the 15.3% self-employment tax (FICA). That part hits hard. Many forget it’s on top of your income tax. TurboTax cries every time i file 😢
 
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