Most people pay federal income tax by:
A. paying the total amount owed by April 15.
B. filing quarterly tax payments.
C. having amounts withheld from income.
D. earning tax credits for various deductions.
I chose d. But I am not sure
Nope. Try again.
I meant to say C.
C. is correct.
The correct answer for how most people pay federal income tax is C. having amounts withheld from income.
When you work as an employee, your employer is required to withhold a portion of your paycheck for federal income tax purposes. These withholdings are based on your income level and the information you provided on your W-4 form, which helps determine the correct amount to withhold. The employer then sends these withheld amounts directly to the IRS on your behalf throughout the year.
At the end of the tax year (usually by April 15th), you will file a tax return, where you provide a detailed report of your income, deductions, and credits (if applicable) for the year. This return will reconcile the amount you already paid in taxes through withholding with the actual amount you owe or are owed as a refund.
Option D, earning tax credits for various deductions, refers to taking advantage of deductions to reduce your taxable income, which can help lower the amount of tax you owe. However, this option is not how most people pay their federal income tax. It is an action taken to lower the tax liability when filing the tax return.
It's important to note that some individuals may also need to make quarterly tax payments (Option B) if they have income not subject to withholding, such as self-employment income or investment income. In these cases, estimated tax payments are made throughout the year to cover the tax liability.
Therefore, the most common way people pay federal income tax is by having amounts withheld from their income (Option C), which is then reconciled when filing their tax return.