Income Taxes by dfhdhdhdhjr


									Income Taxes

Our Tax System
Types of Taxes

  Progressive – taxes that take a larger
   share of income as the amount of income
    Federal Income Taxes
 Regressive – taxes that take a smaller
  share of income as the amount of income
   Sales taxes
   Consumption taxes
   Excise taxes (taxes imposed on specific
    goods and services such as gas, cigarettes,
    air travel, telephone service)
 Proportional taxes (flat taxes) – taxes for
  which the rate stays the same,
  regardless of income
   Property taxes
of the Tax System
  The IRS (Internal Revenue Service)

  The Power to Tax

  Paying Your Fair Share
 The IRS (Internal Revenue Service)
   Agency of the Dept. of Treasury
   Headquarters in Washington D.C. with
    seven regional offices
   Function to collect income taxes & enforce
   Provides services to taxpayers
     Assists with filing taxes
     Prints pamphlets
     Furnishes tax information to schools and colleges
 The Power to Tax
   Power to levy taxes rests with Congress
   Bills for raising revenue originates in House
    of Representatives Ways & Means
   Proposals may come from president, Dept.
    of Treasury, or a member of Congress.
 Paying Your Fair Share
   Tax system is graduated; tax rates increase
    as taxable income increases
   Tax rates apply to income ranges (tax
   There are currently 6 brackets ranging from
    10% to 35%.
 Voluntary Compliance
   Citizens are expected to
      Complete W-4 accurately
      Obtain necessary forms and instructions
      File a return
      Complete return accurately
      File on time (April 15)
         Filing late can result in interest charges on amount
          owed plus a fine and/or imprisonment
   Tax Evasion – willful failure to pay taxes
      Serious crime punishable by a fine or
       imprisonment or both
 Audit – examination of tax return
 Individuals can
   Represent themselves
   Give someone the power to take their place
    (lawyer, accountant, immediate family
    member, or enrolled agent)
   Bring anyone for support during session
    (such as accountant, tax preparer, attorney,
 Office audit
   Asked to bring documentation to IRS office
    to answer specific questions
 Correspondence audit
   More common than office audit
   IRS sends letter asking for specific
   Taxpayer provides evidence
 Field audit
   IRS agent visits the taxpayer to verify
    information and ask specific questions
Source: Managing Your Personal Finance, 5th Edition,
Joan S. Ryan

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