The IRS has estimated that taxpayers have spent a staggering 8.9 billion hours to comply with rules pertaining to federal taxes in 2016. This is equal to 13,000 human life spans. The only reason taxpayers do such hard work is that they expect a federal refund.
The amount of tax paid depends upon which income group you are included into. Higher income equals more taxes to be paid to the IRS. This holds true without the exceptions of deductions and tax credits. At present, the schedule for income tax for all taxpayers has a total of seven brackets. The lowest bracket comes to 10 percent and the highest falls into 39.6 percent. According to tax data gleaned from the Internal Revenue Service (IRS), the most popular marginal tax bracket is the one at 15 percent. This is applicable on individuals whose adjusted gross incomes are anywhere from $8,925 to $36,250 and for joint filers, anywhere from $17,850 to $72,500. The surprising take away from the data is that the zero percent tax bracket comes in close second. The latter has more than 36 million tax filers. The advantage of deductions and tax credits will help such joint filers and individuals to get the advantage of zero income tax.
Working Americans with lower incomes have an important tool in the Earned Income Tax Credit. This credit is one of the most overlooked. It is estimated by the IRS that about 25 percent of the EITC eligible taxpayers do not claim it. Two major reasons exist for this. One is that they find the rules to be complicated and the other is that they are unaware that they qualify as their taxable income is zero. A tax return is also not filed by them. In total, about 77 percent of the total American households can be included within the tax bracket of 15 percent or even lower. However, it is observed that the cream 20 percent of all the income earners pay about 69 percent of all the federal income taxes.
The coming months can witness big changes. President Donald J. Trump has promised US taxpayers a far reaching re-arrangement of the present seven bracket long tax schedule. The new president has pledged to simplify the existing tax schedule into only three brackets-12 percent, 25 percent and 33 percent. The president is interested to see tax cuts for most Americans.