Figuring what you owe

When you know which form to use, the next step is filling it out. Each form comes with detailed instructions that walk you through every step. And if you file electronically, the software program you’re using will prompt you to provide the required information.

Here’s a quick, simplified overview of what happens when you complete a federal return, though not line-by-line instructions for how to complete a form:

1. You add up all your income to find your gross income, and subtract any adjustments you’re entitled to deduct to find your adjusted gross income (AGI). These adjustments include things like interest on student loans, tuition you pay for higher education, contributions to deductible IRAs, and several others for which you may qualify.

2. You subtract the exemptions and deductions you’re entitled to take from your AGI to find your taxable income. In most cases, you can take an exemption for yourself and for each qualifying dependent. Similarly, you can take a deduction for some of the money you spent during the year. Most people use the standard deduction.

3. You look up the tax that’s due on your taxable income. If your taxable income is less than $100,000, you can find the amount in the tax tables that the IRS publishes each year. If it’s more, you can calculate what you owe using the Tax Rate Schedules the IRS provides.

4. If you are entitled to any tax credits, you subtract them from the tax that’s due. Among the credits you may qualify for are those for education expenses, retirement savings plan contributions, earned income credit, purchase of a hybrid car, and perhaps childcare or child tax credits.

5. If more tax was withheld than you owe, you’re entitled to a refund. If you still owe some part of the tax that’s due, you have to pay it when you file the return.