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Topic 7: Paying Your Way

Topic 7: Paying Your Way. Mrs. Tobe. Topic 7.01: How do you use bank services?. Identify types of bank account documents that are prepared on a regular basis. Explain the information that must be provided on checks. Describe how to fill out checks correctly.

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Topic 7: Paying Your Way

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  1. Topic 7: Paying Your Way Mrs. Tobe

  2. Topic 7.01: How do you use bank services? • Identify types of bank account documents that are prepared on a regular basis. • Explain the information that must be provided on checks. • Describe how to fill out checks correctly. • Discuss the importance of legibility in filling out checks. • Explain how to fill out deposit/withdrawal slips correctly. • Discuss how to place a stop payment on checks. • Describe how to endorse checks. • Demonstrate procedures for preparing bank account documents.

  3. Topic 7.02: How do you pay your bills? • Identify frequently paid bills. • Student loans, mortgage, cable bill, phone bill, utilities bill, credit cards, auto insurance, ect. • Explain information usually found on bills. • Account number, due date, amount due, name of person on bill, list of fees/charges/expenses • Discuss the importance of verifying expenses identified on bills. • To make sure they are accurate • Catch identify theft early • Describe ways that bills can be paid • manually, electronically, direct withdrawal, etc.

  4. Topic 7.02: How do you pay your bills? • Explain cautions to take when paying bills online. • Some credit card companies, mortgage lenders and automobile financing companies change due dates. Check the due dates for such bills when they arrive. • Utility and phone companies are usually a little more flexible and will wait for a few days before they send you a reminder notice or charge you a late fee. Credit card companies, mortgage and automobile lenders, oil companies and landlords are stricter. • Many banks allow you to arrange for automatic bill payment from your checking account.

  5. Topic 7.02: How do you pay your bills? Procedures to pay bills • SET ASIDE A SPECIAL PLACE TO PUT YOUR BILLS WHEN THEY ARRIVE, SUCH AS A DESK CUBBYHOLE, A SPECIAL SECTION IN A DRAWER OR A BILL INBOX. AS SOON AS YOU RECEIVE THEM, OPEN YOUR BILLS, THEN PUT THEM IN THIS SPECIAL PLACE. • SET ASIDE TWO TIMES A MONTH, TWO WEEKS APART, TO PAY BILLS. THE MIDDLE AND END OF THE MONTH ARE GOOD TIMES. • CALL THE COMPANIES THAT SEND YOU BILLS AND HAVE THEM REVISE YOUR PAYMENT DUE DATES TO CORRESPOND WITH ONE OF THE TWO TIMES YOU PLAN TO PAY YOUR BILLS EACH MONTH. • MARK YOUR CALENDAR TO REMIND YOU OF BILL-PAYING DATES AND TO HELP YOU KEEP TO YOUR SCHEDULE. • PAY YOUR BILLS WITH CHECKS OR MONEY ORDERS, THEN NOTE THE CHECK NUMBER, THE DATE AND THE AMOUNT PAID ON THE RECEIPT PORTION OF EACH BILL. • FILE THESE RECEIPTS AWAY AND KEEP THEM FOR SEVEN YEARS. • PLACE THE ENVELOPES CONTAINING YOUR PAYMENTS NEXT TO YOUR KEYS SO THAT YOU WILL REMEMBER TO TAKE THEM WITH YOU AND MAIL THEM IMMEDIATELY.

  6. Topic 7.03: What do you do if the bill’s wrong? • Describe types of errors that are found in billing statements. • A charge for something you didn't buy • A charge for a purchase made by someone not authorized to use your account. (Your responsibility for unauthorized charges is limited to a maximum of $50.) • A charge that is not properly identified on your bill • A charge for an amount different from the actual purchase price • A charge entered on a date different from the purchase date • A charge for something that you did not accept when delivered • A charge for something not delivered according to agreement. • A bill with an error in the arithmetic • A bill failing to show a payment, return, or other credit to your account. • A bill in which you were charged twice for the same item. • A bill mailed to the wrong address, when you've notified them of an address change at least 20 days before the end of the billing period • A questionable item, or an item for which you need more information.

  7. Topic 7.03: What do you do if the bill’s wrong? • Explain how to interact with a customer-service representative to fix an incorrect billing statement. • LOOK AT YOUR BILLING STATEMENT EACH AND EVERY MONTH. SLIDING IT INTO A DRAWER UNOPENED WILL END UP COSTING YOU MORE MONEY IN THE FUTURE. AFTER LOCATING YOUR INCORRECT BILL CHARGE, HIGHLIGHT EACH INSTANCE THE ERROR APPEARS. CALCULATE THE COSTS AND OBTAIN AN ACCURATE TOTAL. THINK ABOUT ANY CHANGES YOU MAY HAVE MADE TO YOUR ACCOUNT DURING THESE INSTANCES. • SET ASIDE ENOUGH TIME FOR YOU TO SPEAK TO A REPRESENTATIVE WITHOUT FEELING RUSHED. YOU WILL NEVER BE ABLE TO PRESENT YOUR FACTS AND GET THE ISSUE RESOLVED IN ONE SECOND. MAKING SURE THAT YOU ARE ABLE TO HAVE ENOUGH TIME TO FOCUS ON WHAT THE REPRESENTATIVE IS TELLING YOU AND EXPLAINING YOUR SITUATION IS VITAL.

  8. Topic 7.03: What do you do if the bill’s wrong? • CALMLY PRESENT YOUR FACTS TO THE CUSTOMER SERVICE REPRESENTATIVE. ADVISE THEM OF ANY ISSUES THAT YOU THINK MIGHT HAVE CONTRIBUTED TO THIS ERROR AND ASK HOW IT CAN BE AVOIDED IN THE FUTURE. SPEAKING TO A REPRESENTATIVE IN AN ANGRY TONE WILL CAUSE THEM TO BE UNSYMPATHETIC TO YOUR ISSUE AND TUNE YOU OUT COMPLETELY. • NOTATE EVERYTHING THE REPRESENTATIVE IS TELLING YOU. FIND OUT HOW THEY ARE GOING TO RESOLVE YOUR ISSUE AND HOW LONG WILL IT TAKE FOR YOU TO SEE THE END RESULT. ONCE THEY ARE ABLE TO INFORM YOU OF THE NECESSARY CORRECTIONS, YOU WILL KNOW THAT THEY HAVE LISTENED TO YOUR ISSUE FULLY. • OBTAIN THE FULL NAME AND IDENTIFICATION NUMBER OF EVERY CUSTOMER SERVICE REPRESENTATIVE THAT YOU SPEAK TO. LATER ON, IF YOU ARE STILL EXPERIENCING AN ISSUE THE NEXT CUSTOMER SERVICE REPRESENTATIVE WILL BE ABLE TO QUICKLY CHECK THE PREVIOUS STEPS. ALSO NOTATING THE TIME AND DATE OF YOUR PREVIOUS CALLS CAN BE EXTREMELY USEFUL.

  9. Topic 7.03: What do you do if the bill’s wrong? • Always calmly inform the customer service representative of your issue. • Review your bill statements and highlight errors. • Notate names or identification numbers of every representative you speak to. • Never yell and become irate with the customer service representative. • Never rush through your issue without explaining it.

  10. Topic 7.03: What do you do if the bill’s wrong? • Describe information to include in a dispute letter when resolving incorrect bills. • Give you the name and address of credit reporting agencies and other persons to which the creditor has reported information about your account. • The creditor must report to them that you have challenged your bill. • When the matter is settled, the creditor must report the outcome to them. • You may contact these credit reporting agencies to have your side of the story added to your credit record. 

  11. Topic 7.04: What taxes do you pay? • Tax liability- The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable event. Tax liability can be calculated by applying the appropriate tax rate to the taxable event's tax base. Taxable events include, but are not limited to, annual income, the sale of an asset, a fiscal year-end or an inheritance. A tax liability is a legal claim on assets. Should an entity default on paying its taxes, the governing authority may foreclose on the delinquent account, or take out a lien or encumbrance on an asset.

  12. Topic 7.04: What taxes do you pay? • Describe types of taxes • Income: Income taxes are those based on the amount of income earned or received by members of society. • The most common income tax is the personal income tax that comes due April 15th of each year. • In principle, this is a tax on all income received. In practice, a great deal of income is excluded. • Other types taxes are applied to specific types of income or income-generating activities. • Two important examples are the corporate profits tax, placed on income or profit received by corporations, and the Social Security tax, placed on the wage earnings of workers. • Income taxes are the primary source of tax revenue at the federal level and is increasingly important for many state governments.

  13. Topic 7.04: What taxes do you pay? • Sales: A popular activity subject to taxation is the sale or exchange of commodities. • General sales taxes are those placed on the retail sales of almost all goods purchased within a state, county, or city political jurisdiction. • In some cases, services or specific types of goods (such as food or medicine) are excluded. • In other cases, the sales tax (often termed excise tax) is placed only on a specific commodity, such as gasoline, alcohol, or tobacco. • Sales taxes are a major source of revenue for most state and local governments.

  14. Topic 7.04: What taxes do you pay? • Wealth: A number of taxes are placed on different types of wealth. • At the top of this list for most people are property taxes on homes and personal possessions. • Another type of wealth taxes is the inheritance tax levied on assets passed along after death and the gift tax levied on assets passed only while still living. • Property taxes are a key source of revenue used by local governments to finance education expenditures.

  15. Topic 7.04: What taxes do you pay? • Identify levels of government that collect taxes • Federal • State • Local • Each level of government collect taxes to pay the people that are collecting that tax.   • For example, the state collects unemployment tax to pay the people that are collecting unemployment.   • The federal government collects tax for social security to pay the people that are collecting social security.  

  16. Topic 7.04: What taxes do you pay? • Explain the purpose of taxes. • There are many services offered to citizens that could not be managed effectively under any other system. • The federal government uses your tax dollars to support Social Security, health care, national defense and social services such as food stamps and housing. • Services provided by taxes in South Carolina are public schools, safe highways, health care, prisons and social services for low-income citizens.  The city or county where you live provides water and garbage service, police and fire protection and also contributes to public schools. • We can all admit that these services are necessary.  But why must they be paid for with taxes?  Why shouldn't we just pay individually for what we use?  The answer is simple:  Because no one could afford it.  Each person would have to pay the full fee for the service regardless of their ability to pay.  • Our tax system is based on our "ability to pay."  The more money we earn, the more taxes we pay.  And the opposite is also true.  If we earn a small income, we pay less taxes.

  17. Topic 7.04: What taxes do you pay? • Discuss who is required to pay taxes. • Income for tax purposes includes money made by working for an employer, self-employment and tips, interest earned, excess retirement distributions and the sale of a home. • If an employee working for an employer made over the standard deduction plus the exemption amount, then the employee must file taxes. Single students who are being claimed by parents or guardians must file if their income exceeds the standard deduction amount.

  18. Topic 7.05:How do you pay the government? • Adjusted gross income- Income (including wages, interest, capital gains, income from retirement accounts, alimony paid to you) adjusted downward by specific deductions (including contributions to deductible retirement accounts, alimony paid by you); but not including standard and itemized deductions. • 1040 EZ tax form - Form 1040EZ is a simplified version of Form 1040 also called "Income Tax Return for Single and Joint Filers with No Dependents." If you make over $100,000, you may not use Form 1040EZ. Form 1040EZ only allows you to take standardized deductions and does not permit you to take tax credits other than the Earned Income Tax Credit (EITC). • 1040 tax form- Form 1040 is appropriate for all individual U.S. tax payers. If you plan to itemize your deductions or have capital gains, you will need to use Form 1040.

  19. Topic 7.05:How do you pay the government? • Taxable income- The amount of income subject to income taxes; found by subtracting the appropriate deductions (IRA contributions, alimony payments, unreimbursed business expenses, some capital losses, etc.) from adjusted gross income • Exemptions- A direct reduction taken from taxable income for a specific reason, as allowed by the IRS. • Deductions- An expense subtracted from adjusted gross income when calculating taxable income, such as for state and local taxes paid, charitable gifts, and certain types of interest payments.

  20. Topic 7.05:How do you pay the government? • Identify criteria for filing personal income tax forms. • A copy of your tax return from last year • The Social Security cards of you, your spouse and dependents, if applicable • W-2s from all employers • 1099 forms detailing dividends and interest paid to you. • Form 1099-G for any refund, credit or offset of state or local taxes. • All small business receipts. • Other 1099 forms such as 1099-DIV, 1099-R • Income statements from rental real estate, royalties, partnerships, S corporation, trusts • Unemployment Compensation received. • Social Security benefits received. • Other Income

  21. Topic 7.05:How do you pay the government? • Describe the information contained on a W-2 form. • You will need to report all wages you earned from your job or jobs during the year. Your employers are required to provide you with Form W-2, Wage and Tax Statement. Form W-2 must be mailed out or hand-delivered to you no later than January 31st. • Gather all your W-2 statements from each job you worked during the year. • Look in Box 1 of the W-2. This is your total wages. Using a calculator, add up the Box 1 amounts from every W2. • Put the total figure on Form 1040 Line 7, Form 1040A Line 7, or Form 1040EZ Line 1.

  22. Topic 7.05:How do you pay the government? • Explain an employer’s responsibility for providing employees with W-2 forms. • Each employer who withholds income tax, social security tax, and Medicare tax from employee earnings must furnish each employee with an annual report of these withholdings. • The report shows total year’s earnings and the amounts withheld for taxes for an employee. • The report is prepared on the Internal Revenue Service From W-2. • Employers are required to furnish From W-2 to each employee by January 31 of the next year.

  23. Topic 7.05:How do you pay the government? • Four copies (A to D) of the form are prepared for each employee. • Copies B and C are given to the employee. • The employee attaches Copy B to a personal federal income tax return and keeps Copy C for personal record. The employer sends Copy A to the Social Security Administration and keeps Copy D for the business’s Records. • Businesses in states with state income tax must prepare additional copies of From W-2. • The employee attaches the additional copy to the personal state income tax return.

  24. Topic 7.05:How do you pay the government? • Identify forms of income that must be reported on personal income tax forms. • Income From Jobs• Forms W-2 for all employers for whom you and your spouse worked during the year

  25. Topic 7.05:How do you pay the government? • Investment Income• Interest income - Form 1099-INT • Dividend income - Form 1099-DIV • Proceeds from the sale of stocks, bonds, etc. - Form 1099-B • Confirmation slips or brokers' statements for all stocks, etc. that you sold in the tax year. • Schedule(s) K-1 (Form 1065) from investments in partnerships • Schedule(s) K-1 (Form 1120S) from investments in S Corporations • Income from foreign investments - Amount of foreign taxes paid (you can find this on the brokers' statement):• Income from stock option exercises and sales:     - Stock option agreement (showing type of options you received)      - Stock option statement showing exercise prices of options      - Form 1099-B for proceeds from stock sale • Sale of employee stock purchase plan shares:      - Form 1099-B for proceeds from stock sale      - Stock price on grant date:     - Stock price on purchase date:     - If stock sale occurred before qualifying period begins, Form W-2 showing "compensation income" from a disqualifying disposition

  26. Topic 7.05:How do you pay the government? • Income from State & Local Income Tax Refunds• Form 1099-G from state or local governments • State income tax return from the prior tax year • City income tax return from the prior tax year, if any

  27. Topic 7.05:How do you pay the government? • Alimony Received• Bank statements or record of deposits • Business or Farming Income• Books/accounting records for your business, OR: • Invoices or billings • Bank statements • Cancelled checks for expenses • Payroll recordsIn addition you need:• Invoices for major machinery, equipment, furniture, etc. purchases • Logs or other records listing vehicle mileage • Inventory records, if your business maintains an inventory of goods or materials

  28. Topic 7.05:How do you pay the government? • If You Use Your Home For Business• Square footage of your home office area:• Total square footage of your home:• Total rent paid, if home is rented:• Mortgage interest reported on Form 1098:• Property tax payments from assessor's bill, cancelled checks, or impound records:• Homeowner's insurance premium payments:• Invoices for repairs and maintenance on your house• Utility bills

  29. Topic 7.05:How do you pay the government? • IRA/Pension Distributions• Form 1099-R for payments from IRA or retirement plans • Account summary form for the year for your IRA accounts, or • Deposit receipts and contribution records • If you received a distribution from an IRA account - the most-recently filed Form 8606, if you made contributions in prior years to IRAs that weren't deductible on your return

  30. Topic 7.05:How do you pay the government? • Rental Property Income• Profit and loss statements from your property manager, or • Checkbook or cancelled checks for expenses • Form 1099-Misc or other records for rental income paid to you • Mortgage interest reported on Form 1098 • Property tax payments from assessor's bill, cancelled checks, or impound records • Record of suspended rental losses from prior years (usually shown on last year's return)

  31. Topic 7.05:How do you pay the government? • Unemployment Income• Form 1099-G from your state unemployment agency, or • Unemployment check stubs and deposit records • Social Security Benefits• Form SSA-1099

  32. Topic 7.05:How do you pay the government? • Income From Sales of PropertyIf the property was sold in the tax year:• Sales proceeds - Bill of sale, escrow statement, closing statement or other records • Cost of the property you sold – Invoices, receipts, or cancelled checks • Improvements made to the property – Invoices or construction contracts and cancelled checks If the property was sold at a profit before the tax year on the installment basis:• Previous year’s return – Form 6252, Installment Sales • Amount of principal collected on the installment note owed to you and the date you received each payment:• Amount of interest collected on the note:• Name, address and social security number of the buyer:

  33. Topic 7.05:How do you pay the government? • Miscellaneous Income• Jury duty pay records • Form(s) W-2G for gambling and lottery winnings • Receipts for all gambling purchases • Form 1099-MISC for prizes and awards you received • Form 1099-MSA for distributions from medical savings accounts • Scholarship records (if you used the money for anything other than tuition, books, and supplies) • Director’s fees receipts if you received money for serving on a corporate board of directors

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