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Taxes! Powered By Docstoc
   Taxes and the Government – how and
     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
   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

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

How did it all get started?
“No Taxation without
   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
 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
  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
   16th Amendment gave Fed.
    Gov power to tax individual
    and corporate incomes.
 Income tax rates
 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
 Workers in 1943 were the first to have
  taxes withheld from their paychecks
        Bringing us to present day
 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
       Government helps though welfare, SS, and
        unemployment benefits
Where does the Government get this

 We need to pay the people who perform
  the public services.
List all the taxes that we
 The U.S.
  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                      
                                     #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?

     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

   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
   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
  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
  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
   Taxes can be filed on-line (over 40% are)
     Will   get refund faster