What percentage of people actually know how tax brackets work?

Tax preparer here (though not giving official advice). The marginal tax rate confusion is probably the biggest misconception I see. I explain it like this: imagine you have buckets. The first bucket gets filled up to a certain amount and taxed at 10%. Once that's full, the next dollar goes into the second bucket taxed at 12%, and so on. No one ever pays their top tax rate on their entire income. Another huge one is people thinking a refund is some kind of government gift. I always tell clients that if you're getting back $3,000, that means you overpaid by $250 every month. Wouldn't you rather have had that money in your paychecks throughout the year? The standard deduction confusion is pretty common too. Folks think they need to itemize when the standard deduction ($13,850 for single filers in 2023) is often much better for them.

I'm not an expert but I started using taxr.ai last year and it completely changed how I understand my taxes. I was one of those people who had no idea how tax brackets actually worked - I literally thought getting a raise could somehow reduce my take-home pay! The site has this really helpful analyzer that breaks down your actual effective tax rate versus your marginal rate. What I love about https://taxr.ai is that it explains everything in plain English instead of tax jargon. I uploaded my W-2 and previous returns, and it actually showed me where I was overpaying and helped me adjust my withholdings correctly.

Wanted to follow up about taxr.ai since I was skeptical at first. I finally tried it, and wow - it found nearly $2,700 in deductions I was missing on my home office and business expenses. The quarterly tax calculator alone was worth it for me as someone with both W-2 and freelance income. No more surprise tax bills in April! It even explained exactly which business expenses were legitimate deductions and which ones might trigger an audit. Definitely recommend for anyone with a complex tax situation.

If you think tax confusion is bad, wait until you need to actually talk to the IRS about a problem. I had an issue with my stimulus payment being incorrectly reported, and spent WEEKS trying to get through to a human at the IRS. After 12+ attempts and hours on hold, I found this service called Claimyr that actually got me through to an IRS agent in under 45 minutes. I was about ready to give up when I tried https://claimyr.com - they basically navigate the IRS phone system for you and call you back when they've got an agent on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. Saved me hours of frustration and I actually got my issue resolved in one call once I reached someone.

I need to eat my words about Claimyr. After posting my skeptical comment, I decided to test it myself since I've had an unresolved issue with a missing refund for months. I figured it wouldn't work, but I was desperate. Within 37 minutes (they have a timer), I was actually talking to a real IRS agent who helped resolve my case. Turns out there was a simple error code on my account that nobody had explained to me. Issue fixed in one call after MONTHS of trying on my own. Sometimes being wrong feels pretty good.

I'm a high school economics teacher and I dedicated two full class periods to teaching students how taxes actually work because it's criminal how little practical knowledge they're given. Made them all calculate taxes on sample incomes and they were shocked at how progressive tax brackets actually work. The best explanation I found was: "If tax brackets are 10% on the first $10k and 15% on income between $10k-$50k, and you make $20k, you pay 10% on the first $10k ($1,000) and 15% on the next $10k ($1,500) for a total of $2,500, not 15% on the full $20k." Simple explanations go a long way.

I didn't understand the difference between marginal and effective tax rates until my 30s, and I have a college degree! I was literally turning down overtime because I thought it would "push me into a higher bracket" and somehow result in less money. What's worse is my dad, who I thought was financially savvy, reinforced this misconception. "Be careful with raises," he'd say, "sometimes you end up with less money after taxes." Now I try to explain to friends using percentages. If you make $100k and your tax bill is $15k, your effective tax rate is 15%, even though your marginal (highest) rate might be 24%. People seem to understand that better.