Question

phyllis, who is single, has itemized deductions totaling $20,000. she overpaid her 2018 state income tax and is entitled to a refund of $400 in 2019. phyllis chooses to apply the $400 overpayment toward her state income taxes for 2019. she is required to recognize that amount as income in 2019.

Answer 1

It is true that if an overpayment resulted in a tax benefit, it makes no difference whether it is reimbursed or used to reduce the 2019 state federal income tax due.

The Internal Revenue Service (IRS) imposes a levy known as the federal income tax on the yearly income of people, businesses, trusts, and other legal entities. All forms of income that constitute a taxpayer's taxable income are subject to federal income taxes, including wages, salaries, commissions, bonuses, tips, investment income, and certain categories of unearned income.

Individual federal income tax rates in the US are progressive, which means that they rise in proportion to taxable income. Federal income tax rates range from 10% to 37%, and they become effective at a certain level of income. Tax brackets are the ranges of income that the rates apply to. Income that is subject to each bracket is taxed at that rate.

Learn more about Federal income tax  here

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