Final answer:
It is true that individuals need to know their filing status to determine the correct taxable income and income tax liability. Filing status affects the tax rate schedules and deductions, impacting the final calculation of income tax. Understanding these elements is essential for accurate tax filing and compliance with the tax code.
Step-by-step explanation:
Individuals must know their filing status to correctly compute both taxable income and the related income tax liability: True.
In the U.S. federal tax system, the amount of tax owed depends on various factors, including a taxpayer's filing status - such as single, married filing jointly, etc. - which is critical for determining the correct tax rates and applicable schedules. The taxable income is calculated by subtracting deductions and exemptions from the adjusted gross income. Once the taxpayer knows their taxable income, it is applied against different tax rates for different levels of income, illustrated by tax schedules available from the IRS. These schedules show that as income increases, both the amount of tax and the percentage of tax relative to additional income rise. It's essential to note that there could be other factors like tax credits or the alternative minimum tax that could affect the final tax liability.
Having an understanding of basic concepts like the standard deduction, adjusted gross income, and the difference between using the simplest 1040EZ form and more complex forms with itemized deductions can aid individuals and households in fulfilling their financial responsibilities and complying with governmental policies. Thus, knowledge of one's filing status is fundamental in accurately computing taxable income and the subsequent tax owed.