taxes!!
DESCRIPTION
Taxes!!. We Need Taxes For…. National Defense Police and fire protection Health services Public Education Water, gas and electric systems Environmental protection…. Your Paycheck Stub. - PowerPoint PPT PresentationTRANSCRIPT
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Taxes!!
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We Need Taxes For…..• National Defense• Police and fire protection• Health services• Public Education• Water, gas and electric systems• Environmental protection…
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Your Paycheck Stub• When you first get a job, and
receive your first paycheck, you will receive something that looks like this…along with your check…
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Paycheck Terms• Gross Income – all
money, goods, and property received (BEFORE TAXES ARE TAKEN OUT)
• Net Income – The amount of take home pay (AFTER TAXES ARE TAKEN OUT)
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Taxes and Your PaycheckFICA – Federal Insurance Contribution Act Amount paid to the social security trust for fund for the Social
Security and Medicare programs (6.2% withheld for SS and 1.45% for Medicare)
Federal Income Tax Amount paid to the US Treasury to support US government
programs and services (ranges from 10-35% of your paycheck)
State Income Tax Amount paid to your state government for state funded programs
(ranges from 3-11% of your paycheck)
Local Income Tax Occupational tax paid to your city or county for the privilege
(ranges in %—IL does not withhold this tax)
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Withholdings
•Taxes are paid as income is earned•Taxes are
withheld based on Form W-4 information
W-4 Employee’s Withholding Allowance Certificate A form that helps an employer determine how much to withhold from an employee’s paycheck.
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Withholding Cont.• Withholding too much
– Payroll calculated on ANTICIPATED annual salary
– Results in refund• Withholding too little
– Funds due to government when taxes are filed
– Payments can be made– Reduce allowances– Specify extra & withheld on W-4
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W-4 Terms• Exempt (from withholding)–
do not pay federal income tax…BUT PAY SOCIAL SECURITY
• Dependent: A person who relies on someone else for support.
• A taxpayer may claim an exemption for a dependent if certain conditions are met. Taxpayers cannot claim themselves or their spouses as dependents.
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• Allowance – Number that reduces the amount withheld on you paycheck
• The larger the allowance, the less money withheld from your paycheck
LET’S FILL ONE OUT!!!!
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Filing a Tax Return• Must make a certain amount of
money• Tax Return – Set of forms that a
tax payer uses to calculate their tax obligation.– If you owe – you pay– If you overpaid – you get refund– Tax Day!!! April 15th
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Tax Documents• W-2• Form 1099–INT• Form 1040EZ
– You are single or married filing jointly – You have no dependents (people you
support financially) – You and your spouse are under 65 – Neither you and your spouse is blind – Your taxable income is less than
$50,000 – You earn no more then $400 in
interest – You had no income other than wages,
interest, tips, scholarship, or unemployment compensation
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Form W-2 •Shows how much employees earn•Copy must be
attached to tax return
• How much was withheld
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1040EZ• Adjusted Gross Income –when you add
the income from all sources (this is your total income before subtracting any deductions or exemptions)
• Determine Your Deduction– Standard deduction – Amount you may
subtract from your adjusted gross income
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1040EZ Continued• Taxable Income – after you subtract
exemptions and deductions from your adjusted gross income
• Federal Income Tax Withheld – Amount that was withheld from your paychecks (found on W-2)
• Earned Income Tax Withheld – For workers with low incomes and qualify for this
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1040EZ Continued• Electronic funds transfer – refund can
be deposited electronically in bank
• Sign – Always remember to sign your return and fill in the date and your occupation
• Check for errors – ALWAYS check forms for accuracy before you send them to IRS. If you make a mistake, you may have to pay a penalty or may receive a lower refund than you deserve.
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Filling Out The Forms…• Adjusted Gross Income: Total income
reduced by certain amounts (such as contributions made to a traditional IRA or for student loan interest payments)
• Earned Income: Includes wages, salaries, and tips that are includible in gross income and net earnings from self-employment earnings.
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Filling Out The Forms…• Standard Deduction: An amount,
provided by law that taxpayers can deduct from their adjusted gross income before tax is determined.
• Tax Deduction: A part of a person’s or business’s total expenditures that can be subtracted in determining taxable income.
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Filling Out The Forms…• Unearned Income: Income other than pay
for work performed. Interest and dividends from savings or investments are common types of unearned income.
• Exemptions (Personal or Dependency): Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. The total is subtracted from adjusted gross income before tax is figured on the remaining income.
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Ability to Pay
Those people that have higher incomes and more possessions pay more in taxes simply because they can afford to.
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Progressive Taxes
Higher Income = Higher Taxes
The tax rate increases as the taxable income increases.
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A tax whose rate takes a larger share as the amount of income grows.
• Ex- Joe earns $25,000 and pays 15% in federal income taxes, or $3,750.
• Ex-Sally earns $300,000 and pays 39.6 % in federal taxes, or $118,800
As you can see, Federal Income Tax is PROGRESSIVE.
Progressive Taxes
Bill Gates is in the highest tax bracket!
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Regressive Taxes
EX- Joe earns $20,000 and pays 6 % tax on a $10,000 used car, or 3% of his income.
• Sally earns $50,000 and pays 6% tax on a $10,000 used car, or 1.2% of her income.
• EX -Excise, sales, property, motor vehicle taxes
Tax that takes a smaller percentage from those with a higher income than from those with lower income.