taxes!!

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Taxes! !

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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 Presentation

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Page 1: Taxes!!

Taxes!!

Page 2: Taxes!!

We Need Taxes For…..• National Defense• Police and fire protection• Health services• Public Education• Water, gas and electric systems• Environmental protection…

Page 3: Taxes!!

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…

Page 4: Taxes!!

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)

Page 5: Taxes!!

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)

Page 6: Taxes!!

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.

Page 7: Taxes!!

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

Page 8: Taxes!!

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.

Page 9: Taxes!!

• 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!!!!

Page 10: Taxes!!

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

Page 11: Taxes!!

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

Page 12: Taxes!!

Form W-2 •Shows how much employees earn•Copy must be

attached to tax return

• How much was withheld

Page 13: Taxes!!

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

Page 14: Taxes!!

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

Page 15: Taxes!!

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.

Page 16: Taxes!!

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.

Page 17: Taxes!!

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.

Page 18: Taxes!!

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.

Page 19: Taxes!!

Ability to Pay

Those people that have higher incomes and more possessions pay more in taxes simply because they can afford to.

Page 20: Taxes!!

Progressive Taxes

Higher Income = Higher Taxes

The tax rate increases as the taxable income increases.

Page 21: Taxes!!

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!

Page 22: Taxes!!

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.