Filing

Tax Liability

Definition

The total amount of tax you owe to a taxing authority for a given period. Your federal tax liability is calculated by applying tax rates to your taxable income, then subtracting credits. It is different from the amount you owe when you file: if your withholding and estimated payments exceed your liability, you get a refund. If they fall short, you owe the balance. Tax liability includes income tax, self-employment tax, AMT, and any additional taxes.

Example

Your taxable income results in $12,000 of federal income tax. After a $2,000 Child Tax Credit, your tax liability is $10,000. You had $11,000 withheld, so you receive a $1,000 refund.

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