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Ch. 7: Income Taxes

Ch. 7: Income Taxes. 7.4 Form 1040 EX and 1040A. Answer the following with your groups…. How do taxpayers report their income to the government? Why might a taxpayer choose to overpay his or her taxes? Why might a bank savings account be a better option?

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Ch. 7: Income Taxes

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  1. Ch. 7: Income Taxes 7.4 Form 1040 EX and 1040A

  2. Answer the following with your groups… • How do taxpayers report their income to the government? • Why might a taxpayer choose to overpay his or her taxes? • Why might a bank savings account be a better option? • Why do you think that the IRS allows a taxpayer to claim him/herself as an exemption?

  3. Filing Taxes.. • When you file your taxes, if your employer withheld more than the taxes you owe, you are entitled to a return • This is called your tax return and you will receive it after you have submitted your taxes • If your employer withholds less, than you will have to pay the government the difference

  4. Three basic IRS tax returns • Form 1040EZ – short form (we will talk about this form today) • Form 1040A – short form (we will talk about this form today) • Form 1040 – long form (we will talk about this form tomorrow) • All 3 of these forms allow the taxpayer to round monetary values to the nearest dollar

  5. Filing Taxes • On any tax form you must fill out your name, address, SSN, and filing status • Depending on the form, you must also supply info about family members that you support financially • Each person you support is called a dependent • Generally these are children • You receive an exemption, meaning your taxable income lowers, for each of your dependents

  6. 1040EZ • The following is a list of some of the major requirements to file form 1040EZ

  7. Example 1 • Elizabeth Allison is a food editor for a magazine. She has received a W-2 form from her employer and a 1099 form from her savings bank. What is Elizabeth’s taxable income for the year if she files as a single taxpayer?

  8. Check your understanding • How would Elizabeth’s tax form differ if she were married, filing a joint return, assuming that her spouse had no income to report?

  9. Example 2 • What is Elizabeth’s tax?

  10. Check your understanding • Suppose that Elizabeth had been filing as married filing jointly with her husband, and their combined taxable income was the same as reported on line 6. Why is that tax lower?

  11. Example 3 • Does Elizabeth get a refund or owe the government money? In either case, determine that amount.

  12. 1040A • For those who do not qualify to use a 1040EZ but do not have enough deductions to itemize (list) to have to use the long 1040 form • Must also have a combine income less than $100,000

  13. Example 4 • How many exemptions can Mr. and Mrs. Omar claim?

  14. Example 5 • Determine the Omars’ adjusted gross income. They received $987 interest on bank deposits and $1,200 in stock dividends.

  15. Check your understanding • Lisa and Bob Zee have a combined income from salaries of $87,980. They received 1099 forms for $1,100 in interest from their bank and $1,300 in stock dividends. They have a total of $4,000 in adjustments to their gross income. Determine their adjusted gross income.

  16. Example 6 • Determine the Omars tax for the year • Standard deductions are allowable reductions that are based on your filing status • These amounts are set by the government and change from year to year

  17. Example 7 • Do the Omars get a refund or owe the government money? In either case, determine that amount.

  18. Ch 7 Asnmt 4 • Pg 361 #3 – 5 , 9-15

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