bell ringer: write down what you think of when you hear the word taxes/tax think of the following...

Bell ringer:

•Write down what you think of when you hear the word taxes/tax•Think of the following questions

– What do taxes consist of?– Who pays taxes?

• To whom?

• At your table come up with a 1 sentence summary about taxes, using your bell ringer

• www.Wordle.com

“Taxes are what we pay for civilized society” Oliver Wendell Holmes Jr., 1904

In this photo-list places where tax dollars are used.

Taxes Fund Public Goods and Services

National Defense

State and Local Police

Financial Aid

Health Care for Elderly

Public Education

Social Services

•Taxes are required payments of money to various levels of government.

•Taxes provide revenue for public goods and services that benefit the community and the nation as a whole.

•What are some things that taxes pay for?

•Cooking Oil, Foreigners,Slaves (Ancient Egypt)

Early Taxes

•Sales, Inheritance, Imports,Exports (Ancient Rome)

•Beards, Beehives, Boots,Souls (Russia, 1702)

•Bachelors (England,1695; Missouri, 1820)

•American Revolution caused debt

The Power to Collect Taxes

•Tax was necessary to pay debt

•Article 1, Section 8 of the U.S. Constitutiongranted Congress power to tax

The Sixteenth Amendment

The Federal Government Dollar- Where It Comes From

Excise, customs, estate, gift, and

miscellaneous Taxes8%

Personal Income Taxes

50%

PAYROLL TAXES:Social security, Medicare,

and unemployment and other retirement taxes.

35%

CorporateIncome Taxes

7%

The Federal Government Dollar- Where It Goes

Law Enforcement and General Government

2%

Surplus to Pay Downthe Debt

6%

Social Security, Medicare andother Retirement

36%

National Defense, Veterans and Foreign Affairs

18%

Social Programs18%

Physical, Human, andCommunity Development

10%

Net Interest onthe Debt,

10%

Types of taxes• 1. Regressive• 2. Progressive• 3. Proportional

Regressive• Everyone pays the

• same fixed amount

• Do you think these taxes are fair to all people?

As a group on a piece of paper• How would a $2,000 tax on all

citizens affect the following people: • a lifeguard ($8000)• an automotive technician ($40,000)• a mail carrier ($50,000)• a doctor ($100,000)• Show what percentage of each person's

income would go toward the $2,000 tax

Progressive Taxes

• Higher Income = Higher Taxes

proportional tax

• A tax that takes the same percentage of income from all income groups.

With your group copy down the #’s and fill in the correct information on the same piece of paper

1.

2.

3.4.

5.

Which picture is a regressive tax, proportional tax, and a progressive tax?

What types of things are taxed?

Transaction Taxes• Levied on economic Transactions• Support state and local services• Set on percentages or physical quantities

Property Tax• Levied on property, especially real estate • Fund schools, local services, welfare programs• Can also be levied on boats, RVs, business inventories

State Income Taxes

• Come from earned and unearned income

• Levied on individuals and corporations

• Support state expenses, education programs, and welfare

Each person is responsible for filing a tax return.

Voluntary Compliance

Voluntary Compliance•Keep necessary

records•Report income accurately

•Correctly calculate tax liability

•File returnson time

• People Don’t Pay, Not a Happy Day!worksheet

April 17th-tomorrow -Traditionally the 15th

Happy Tax Day

Bell ringer: What do you need to file your taxes?

Pay-As-You-Go Withholding

•Taxes are paid as income is earned

•Taxes are withheld based on Form W-4 information

• Filling your taxes– This is done on a W-4 form

• This determines federal tax withholding

– http://www.irs.gov/app/understandingTaxes/hows/mod01/sim_mod01_01.jsp

Financial Record KeepingSave:

•Paycheck stubs

•Bank statements

•Completed tax returns and forms

•Warranty information

•Receipts

•Credit card statements

Filing taxes

1040EZ form-Tax form for people who earn under $100,000 and have no dependents

• http://www.irs.gov/app/understandingTaxes/teacher/hows_mod02.jsp

Where to store? • Scan in important documents as PDF• File cabinets

– Organized by month, job, or expense

What % of your pay check is taken up by taxes • Out of your paycheck

– 4.2% goes to social security– 1.45% goes to medicare– TOTAL: 5.65%

• Angela Viviano earns $2,000 a month as a physical therapist's assistant. In addition to payroll taxes and income tax withholding, her employer withholds $50 for her retirement account. Angela's net pay is calculated as follows:

• Gross pay $2,000.00• Social Security tax (4.2 percent of gross pay) -$84.00

• Medicare tax (1.45 percent of gross pay) -$29.00• Income tax (per Form W-4) -$220.00• Retirement -$50.00• Net pay $1,617.00• Angela earns $2,000 and receives $1,617.• Her employer sends $333 ($84 + $29 + $220) to the federal

government and $50 to the retirement fund.

Tax Avoidance versus Tax Evasion

•Tax Evasion:

Failure to pay legally due taxes

•Tax Avoidance: Legal means of decreasing your tax bill

•Information on taxpayer’s returns is private

Taxpayer Rights

•Taxpayers have the right to appeal anIRS decision

Should everyone pay taxes?Why or why not? • If taxes went away what are some

things that would leave with them?

• Many people would not be able to afford school. A high percentage of the people in our communities would be illiterate.

• Roads and other infrastructure would be in good condition in rich areas, but perhaps nonexistent in areas where poor people lived.

• Sanitation would be spotty, so disease would spread.

Does everyone file their own taxes?

Should you do your own taxes article

“The income tax law is a lot of bunk. The government can’t collect legal taxes from illegal money.”

Al Capone

Below are taxpayers' comments about voluntary compliance and the IRS's responses. Match each comment with the correct response.

TAXPAYER COMMENTS IRS RESPONSES

1.IRS publications state that the tax system is voluntary.

A.The requirement to pay is not voluntary. It is explained in the Internal Revenue Code.

2.The government doesn't have the right to force me to pay my taxes and charge me penalties for not paying taxes.

B.Congress gave the Secretary of the Treasurythe power to enforce the income tax lawsthrough involuntary collection.

3.I don't have to pay taxes because payment is voluntary.

C.A taxpayer is required to obey the tax laws, evenif he or she does not agree with them.

4.I don't agree with the tax laws, so I don't have to pay what I owe.

D.In IRS publications, the word voluntary refers tothe system of allowing taxpayers to determinetheir taxes and file their forms on their ownrather than having the government do this for them.