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Taxes

Taxes. Taxes and Your Paycheck. Payroll taxes Based on earnings Paid to government by you and employer Income taxes You pay on income you receive Varies on financial and family situation You are responsible for calculating!. Taxes and Your Paycheck.

wesley-wolfe
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Taxes

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  1. Taxes

  2. Taxes and Your Paycheck • Payroll taxes • Based on earnings • Paid to government by you and employer • Income taxes • You pay on income you receive • Varies on financial and family situation • You are responsible for calculating!

  3. Taxes and Your Paycheck • FICA – Federal Insurance Contributions Act • Social Security • 6.2% of gross income – max $72K in 1999 • Medicare • 1.45% • Companies match your contribution • Withholding • Money taken from paycheck and paid • Avoids having to pay government all at once

  4. Your Paycheck Stub • Gross income • Net income • Withholdings

  5. Terms • W-4 • You are responsible for proper withholdings • IRS • Agency that collects income tax • Allowance • Number that reduces the amount of money withheld from your pay • The larger the allowances the less amount withheld

  6. Withholding • 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

  7. Should you take out extra withholdings as a way to save??

  8. File a Tax Return • Must make a certain amount of money • Tax return – set of forms that taxpayers use to calculate their tax obligation • If you owe – you pay • If you overpaid – you receive • By April 15!!

  9. Documents • W-2 • Form 1099-INT • Form 1040 - Deductions • Form 1040-EZ • You are single or married filing jointly • You have no dependents (people you support financially) • You and your spouse are under 65 • Neither you nor your spouse is blind • Your taxable income is less than $50,000 • You earned no more than $400 in interest • You had no income other than wages, interest, tips, scholarships, or unemployment compensation

  10. 1040EZ • Adjusted Gross Income • Deduction • Standard deduction – amount you may subtract from your adjusted gross income • Taxable Income • Federal Income Tax Withheld • Earned Income Credit

  11. 1040EZ • Total Payments • Tax • Refund/Owe? • Electronic funds transfer • Sign • Check for errors

  12. Taxes and Government • Benefit Principle • Those who use a good or service provided by the government should pay for it. • Example: Roads • Ability to Pay Principle • Make more, pay more • Example: Federal Income Taxes • Taxes can increase from 15 % to 39.6 %

  13. Taxes and Income • Progressive taxes • Higher the tax, the more you earn • Higher tax brackets, for example (15 to 39 %) • Regressive taxes • Less taxes (in %) the more you earn • Tax on vehicle, for example • Proportional taxes • Same share of all people’s income

  14. Collection of Taxes • Direct taxes • Income taxes • Property taxes • You pay • Indirect taxes • Someone else pays • Businesses – sales taxes • Pay-as-you-earn taxes

  15. Types of Taxes • Income taxes • Federal, state, and local • Sales taxes • Property taxes • Excise tax • On sale of specific goods and services - tobacco, gas, alcohol

  16. Types of Taxes • Estate (death) and gift taxes ($10,000) • Business and license taxes • Custom duties and tariffs

  17. Government Spending • The Power to influence • “Sin” tax • Tax Cuts • Charities • Public goods • Roads, schools, national defense, various regulatory agencies • Social Security and Medicare (37% of spending)

  18. Government Spending • National Defense, Veterans, and Foreign Affairs • Social Programs • Net Interest on the Debt • Physical, Human, and Community Development • Law Enforcement and General Government

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