Income and Taxes

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					Income &
Purposes of Taxation

 §    TAX: a required payment to a local,
      state, or national government.

 1.   Fund public goods and services.
 2.   Influence behavior.
 3.   Stabilize the economy.
 4.   Redistribute income.
                               Taxes in US History
School House Rock:
Kinds of Taxes
 § Income tax: income that you earn is
   subject to tax.
   § Your employer will withhold, or take out,
     income tax from every paycheck and send
     the money to the government.

 § Social Security tax

 § Medicare tax
Kinds of Taxes

 § Sales tax: tax paid on the value of goods
   and services. (revenue for state govt.)

 § Excise taxes: included in the price paid
   by consumers.
   §   Fuel = Environmental
   §   Alcohol & Cigarettes = Health/Safety
Kinds of Taxes

 § Progressive Taxes – Take a larger
   percentage of income from high income
   § Examples are State and Federal taxes

 § Regressive Taxes – As income rises,
   the taxes remain the same or decrease
   § Examples are Medicare, Social Security, and
     state sales
Internal Revenue Service

 § (IRS) – Collects
   federal taxes,
   issues regulations,
   and enforces tax
   laws written by the
   United States
How Much is Withheld?

 § Depends on:
   § How much you earn

   § Information you provide on Form W-4
Why file a tax return?

 § Calculate if you have overpaid… or
   underpaid the government for the past

 § Will you owe or get paid this year?
Do I have to file a return?
Tax Time is Here!

 § Must be filed
   by April 15
What Do I Need?

 §   Form W-2: Employer will send
 §   Form 1099-INT: Bank will send
 §   Personal records
What will I be asked?
§ Status
§ Income
  § Includes interest earned
§ Deductions: subtracted from income
     §   Charitable Contributions
     §   Education
     §   Casualty, Disaster, and Theft Losses
     §   Business use of home
     §   Business use of car
     §   Employee business expenses

§ Should I file Standard or Itemized?
     § Standard
     § Itemized
What will I be asked?

§ Tax credits
  § Subtracted directly from the amount of tax
    § Ex: Energy Star Appliances, Insulation, Roof,
      Water Heater

§ Final calculations
  § Overpaid: refund!
  § Underpaid: send in $!
Options for Filing Income TAX
  § Turbo Tax
    § Tax Rap

  § Tax Prep Service
    §   H&R Block
    §   Liberty Tax

  § Paper Forms:
    §   1040EZ
    §   1040
    §   1040 A (LONG)
    Do you have a simple tax
    return? You do if you:
§   Have a filing status of Single or Married Filing Jointly
§   Have no dependents/children
§   Claim the standard deduction
§   Have no mortgage payment
§   Have taxable income of less than $100,000

       You can use the 1040 EZ

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