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For many wealthy taxpayers, news about higher tax brackets can bring feelings of anxiety. A high tax bracket often implies that a person making a good income will pay a large amount of their income in taxes.
That's misleading for two reasons. First, a significant portion of your income is never taxed at all. Virtually everyone is eligible for some tax deductions -- even if you don't have many, you'll still get the standard deduction, which means that some of your income is never taxed at all.
The second reason is that high tax brackets only affect a portion of your income, the amount that's over that threshold. If you see an example "tax bracket" where people with incomes of more than$400,000 a year are in the 50% tax bracket, that only affects the extra money they make beyond$400,000 a year. The first$400,000 is taxed a lot less than what you might think.
When you receive your paycheck, you'll notice that your employer has kept a portion of your pay for income taxes. That portion goes to the IRS.
Filing your taxes with the IRS determines how much you owe. It's based on your income, as well as other factors such as the number of dependents you have. You can file your taxes yourself (by using tax software, and there are some free tax software packages that work for simple returns), or you can pay a tax specialist such as H&R Block to do it for you, and they even offer no-contact tax filing that respects social distancing guidelines.
The IRS uses the money already set aside by your employer to pay that tax bill, then sends you the rest in the form of a tax refund. The sooner you file before the April 18 deadline, the sooner you get that refund.
The big question, of course, is how much of your income is going to taxes. That's where tax brackets come in. They indicate the amount of federal income taxes you'll owe.
Tax brackets divide your income up into small slices. In each of those slices, you have to pay a certain percentage of that slice in income taxes. Let's look at the current tax brackets for an example.
| Bracket | Taxpayers Filing Single | Married taxpayers Filing Jointly |
| 10% | Up to$9,950 | Up to$19,900 |
| 12% | $9,951
|
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