Taxes!

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					Taxes!
     WHAT YOU WILL LEARN
   Taxes and the Government – how and
    why?
     Where   does the government get it’s money?
   Government Spending
     How    does the government spend it’s money?
   Taxes and Your Paycheck
     What   are they taking all of that money out
      for?
   How to File a Tax Return
     1040   EZ
Taxes: The Fundamentals

   What are the three levels of
  government that collect taxes?
      Three levels of Government
   Federal Government - runs the country as a
    whole and makes laws that affect everyone in
    the country.

   State Governments - runs the state you live in
    and makes laws affecting the people in your
    state.

   Local Governments - county, city, or town -
    runs your local area and makes laws affecting
    the people in your area.
        Taxes

How did it all get started?
“No Taxation without
  representation!”
   1781: Constitution – Only state
  governments had power to tax -
they turned over their $ to Fed. Gov
    1788: Constitution ratified – Fed
          given power to tax
 1. Tariffs – taxes on
  imports
 2. Excise taxes – tax
  on the sale or use of
  specific products
1791: First American Direct tax – 7 cents per gallon
to people who made and sold whiskey to raise
Money to pay debts incurred from revolutionary war.
         1794: Whiskey Rebellion
   1791-1794 Farmers
    rebelled and refused to
    pay tax. Tax collectors
    tarred and feathered –
    riots, etc.
   1794 – Home of
    Inspector of Revenue
    burned down – friend of
    president George.
   Pres. George and militia
    of 13,000 squashed the
    rebellion.
  Civil War Income tax
Direct tax on income
 needed pay debts incurred
 by the civil war.
First ever direct tax on
 income in U.S.
Abolished thereafter
           1913: 16th Amendment
   Early 1900’s industrialization
    and modernization – a lot of
    people making a lot of money.
   New machines, inventions –
    increased production,
    businesses expanded
   US became a world power with
    military strength
   Immigration – 25 million new
    citizens
   16th Amendment gave Fed.
    Gov power to tax individual
    and corporate incomes.
                1913-1941
 Income tax rates
  increased.
 1935 Wealth tax
  increased tax rates
  for excessively
  wealthy people to pay
  for FDR’s New Deal.
Victory Tax
  of 1942
          1942 – Victory Tax
 First tax on every individual in the United
  States – 5% of income.
 Due to many avoiding payment of taxes
  the first system of withholding was
  created.
 Workers in 1943 were the first to have
  taxes withheld from their paychecks
        Bringing us to present day
                 taxation
 In our economy, not everyone can work
  or does work.
 BUT - these people are still consumers and
  need to have an income / necessities of life.
 At a minimum they must get food, clothing,
  shelter, and health care. How can they do
  this?
       Government helps though welfare, SS, and
        unemployment benefits
Where does the Government get this
             $$$$$?

 TAXES!
 We need to pay the people who perform
  the public services.
List all the taxes that we
            pay!
 The U.S.
Constitution
  Divides
Government
  Powers
  Federal Responsibilities


   State Responsibilities

   Local Responsibilities
               Federal Government
   REVENUE                         SPENDING
   #1 Federal Income Tax –         #1 Social security / medicare
    personal                        Social programs
   Social security / medicare       (unemployment, welfare, assisted
                                     housing, food stamps, medicare)
   Corporate income tax            Defense / veterans / foreign
   Borrowing (gov. bonds,           affairs
    foreign countries)              Physical, human and
   Excise / customs / gift /        community development
    estate                           (transportation, education, NASA,
                                     Dept. of labor, interstate
   miscellaneous                    highways, Environment)
                                    Interest on national debt (9%)
                                    Law enforcement (CIA, FBI,
                                     federal prison)
        State / Local governments
   REVENUE                      
                                 
                                     SPENDING
                                     #1 education
   #1 Property Tax                 Social services (welfare, park and rec,
                                     unemployment, libraries)
   General Sales tax               Law enforcement / fire / prison
   Individual income tax           Transportation
                                    Housing
   Corporate income tax            Recycling
   Excise tax (fuel, alcohol,      Garbage
                                     Local streets / intrastate highways,
    tobacco)                     
                                     street lights
   Tolls / parking meters
   Legal expenses (tickets,
    moving violations)
    How do we pay these taxes?
   WITHHOLDING

     Income  is withheld from your paycheck
     to prepay you federal income tax and
     social insurance taxes

     Allowsthese taxes to be collected at a
     steady rate rather than all at once

     Easierfor us---spread out over the
     entire year
     Looking at Your Paycheck
   Gross Income
     Amount  you earn before taxes are taken out!
     The amount of income tax you pay is based
      on your gross income for the year



   Net income
     Amount you earn after withholdings are
     taken out
                 Form W-4
   Provides the information your employer
    needs to determine the proper amount to
    withhold from your paycheck.

   Allowances
     Number  that reduces the amount of money
      withheld from your pay.
     The more allowances you claim, the smaller
      the amount that is withheld
                 Form W-4
   Allowances

     Suppose   that you claim 5 when you should
      only claim 1
     You may only have $500 taken out over the
      year, but you may end up owing $3000 all at
      once!


   SAMPLE W-4
                    Form W-4
   You are responsible if the information on
    your W-4 is incorrect and causes your
    withholding to be too small

   IRS (Internal Revenue Service)
     Collects   income taxes
               Filing a Tax Return
Tax Return:       forms that taxpayers use to calculate their
    tax obligation.
   Form W-2:      summary of your earnings and
    withholdings for the year for a job.
   Form 1099-int: statement of the interest your bank
    paid on your savings that year.
   Form 1040EZ:         tax form used by those that make
    less than $50,000; interest less than $1500; no
    dependents; under age 65.
   Tax table
                      W-2
   Wages and Tax Statement
     Totalof all paychecks for a year.
     Summary of deductions
     Must be sent by each of your employer’s by
      January 31.
                Form 1099 INT
 Money (interest) earned from a savings
  account or by being self employed.
 Interest Income is taxable.
     If   over $10 of interest is earned
     1040 EZ (April 15th)
Use Form1040 EZ if you meet all of the
             following:
  filing single or married filing jointly
  claiming no dependents
  gross income is less than $50,000
  taxable interest less than $1500
  do not claim student loan interest deduction
  did not receive any advance earned income
   payments
  do not owe any household employment taxes on
   wages you paid to household employees
  you are under age 65 and are not blind
               Filing a Tax Return
Self-Employed:        own business, lawn mowing,
    baby-sitting, snow removal, etc…
      Any amount above $400
      The burden of paying taxes is left to the
       individual.
   Taxes can be filed on-line (over 40% are)
     Will   get refund faster