New Tool to Calculate Annually Paid Taxes
The American Institute of CPAs (AICPA) has launched the Total Tax Insights calculator, which was designed to enable taxpayers to estimate the amount they pay each year for the most common federal, state and a wide variety of local taxes.
“The AICPA has a long-standing commitment to helping Americans take accountability for their financial health. One critical step in achieving financial well-being is to understand your tax payment and how it impacts your financial decisions. We have introduced this new calculator to help Americans grasp how much they are paying in combined federal, state and local taxes,” said Barry C. Melancon, president and CEO.
“Our recent national poll showed that taxpayers do not know the percentage of their income that goes to pay taxes or how many types of taxes they pay annually. AICPA’s goal is to make federal, state and local taxes more transparent and the Total Tax Insights calculator does that,” Melancon said.
Although the average American may pay more than 20 different taxes during the course of the year, an AICPA poll showed that a majority (54 percent) estimated they pay less than 10 different taxes. Only 11 percent of those surveyed said they had recently added up the total amount of annual taxes they pay to federal, state and local governments.
The poll also showed that two-thirds (67 percent) of those surveyed said they could not accurately estimate the percentage of income they paid last year in all taxes to federal, state and local governments. That number is even higher among those who make less than $100,000 a year; nearly three-quarters (72 percent) said they couldn’t come up with an accurate estimate.
“CPAs know better than anyone how important it is for taxpayers to understand what they are paying in taxes. This new tool is designed to increase awareness of how much people pay in taxes and the importance of factoring this knowledge into every day financial planning. Using the Total Tax Insights calculator is a simple step everyone can take to gain greater control over their financial future,” said Edward S. Karl, CPA, AICPA’s vice president for taxation.
Only basic information is required to use the free Total Tax Insights calculator. At a minimum, visitors to the website input the county or city in which they live, their marital status, their federal “adjusted gross income” and their number of dependents. Based upon the information provided by the user the Total Tax Insights calculator estimates what that taxpayer is paying on an annual basis for approximately 20 different taxes and provides a pie chart that shows the percentage of their total tax bill by category. A user’s privacy is protected because the Total Tax Insights calculator does not require individuals to identify themselves in any way and the data is erased when a user leaves the website.
The AICPA encourages taxpayers to use the Total Tax Insights information and resources as a guide to improve their overall tax and financial well-being. The calculator only provides estimated amounts and a taxpayer’s actual taxes may vary significantly depending on his or her particular situation. For example, income tax calculations do not take into consideration certain deductions, credits or other adjustments. The Total Tax Insights calculator is not a tax preparation tool or a substitute for the expert tax and financial advice of a CPA.
The AICPA will periodically update the Total Tax Insights calculator to reflect the most recent changes in federal, state and local taxes, and taxpayers should consider using the calculator periodically to get the most accurate estimate of their current situation.