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Unit 4- Taxes

Unit 4- Taxes. 5.2 File a Tax Return. Key Terms. Tax Return Form W-2 Form 1099-INT Form 1040EZ Dependent Deduction Social Security Number Taxable income. What is a tax return?.

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Unit 4- Taxes

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  1. Unit 4- Taxes 5.2 File a Tax Return

  2. Key Terms • Tax Return • Form W-2 • Form 1099-INT • Form 1040EZ • Dependent • Deduction • Social Security Number • Taxable income

  3. What is a tax return? • A tax return is a set of forms that taxpayers use to calculate their tax obligation. (how much income taxes they owe.) Is everyone required to file a tax return? • No, only if you have income above the minimum amount set each year by the government.

  4. Name some types of taxable income! • Salary or wages • Tips • Investments/Capital Gains • Interest • Jobs paid in cash • Lottery winnings Your Aunt Sue gave you $200 for your birthday, is this taxable income? • No, you are not required to pay taxes on gifts unless they exceed the amount allowed by the government.

  5. Taxes Timeline • You must calculate and file your tax return by April 15th for the previous year. • For Example: • For the work year January 1, 2010- December 31, 2010 • W-2 Form provided by employers by January 31, 2011 • Form 1099-INT provided by banks by January 31, 2011 • Tax returns due to IRS by April 15, 2011

  6. 2 Sources of Information for Needed for Your Tax Return For most young people these two forms are enough to complete your income tax returns. • Form W-2: a summary of your earnings and withholdings for the year. • Comes from your employer • Must be provided by employers by January 31 • When you file a tax return you must enclose a copy of your W-2 form. (the IRS also receives one from your employer) • Form 1099-INT: a statement of the interest your bank paid on your savings for the year.

  7. Income Tax Forms • All individual tax payers must use one of the following three basic forms for filing a federal income tax return: • 1040 • 1040A • 1040EZ • Most young people qualify to use the simplest form which is the F0rm 1040EZ. • When you are older and your financial life is likely to be more complicated- you will use a 1040 or 1040A. These forms allow you to itemize deductions to reduce the amount of tax you owe. • Deductions are expenses you can legally subtract from your income before calculating your taxes.

  8. How to complete a 1040EZ 1. Label (Identify yourself) • Name & Address • Social Security Number – a unique number assigned to you by the federal government. Memorize this number, you will have to write it on many official documents. 2. Income • Works you through to your taxable income-the income figure that is used to determine your taxes. 3. Payment and Tax • Federal withholdings + (EIC) = Total Payment • Tax- use table to calculate your total tax for the year

  9. How to complete a 1040EZ (Steps 4-6) 4. Refund or Amount you Owe Calculated • Refunds can be deposited electronically 5. Sign Here • Signature, Date & Occupation (your signature declares the information is true) 6. Check for Accuracy and File your Return • Always check your tax forms • Pay amount owed by check or credit card (fee for credit card) • Send tax form along with W-2 & check • Keep copy for your records • Send by April 15th

  10. Self-Employment Tax • Do people who work for themselves pay income tax? • If so, how? • Yes, they must file at 1040. Self employed individuals pay estimated taxes in quarterly installments based upon the income they receive each quarter. • Self-employed individuals are required to complete and attach a Schedule C or C-EZ to their 1040 form. • Most important thing to remember about the self-employed- they pay the same taxes that employees pay and they must “withhold” their own taxes and make the payments themselves.

  11. One more thing………..electronic filing! • You may file your tax return online. • Biggest advantage- you get your refund faster. FAST SLOW On-line returns take 3-4 weeks to process Snail mail returns can take 6 weeks or more.

  12. Concept Reinforcement • For additional understanding you can complete the four parts of the review: Tax Tutorial, Fact Sheet, Simulation & Assessment for payroll taxes & federal income tax withholding: • http://www.irs.gov/app/understandingTaxes/student/hows_mod01.jsp • After you complete the last step the Assessment, print out your score and hand it in to me for extra credit.

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