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TAXES – What You Can’t Avoid!

TAXES – What You Can’t Avoid!. Instructor Name Class Title. Two Things You Can’t Avoid: Death and Taxes!. Understanding Taxes and Tax Forms. The first form you will work with is Form W-4 Personal Allowance Worksheet

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TAXES – What You Can’t Avoid!

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  1. TAXES – What You Can’t Avoid! Instructor Name Class Title

  2. Two Things You Can’t Avoid:Death and Taxes!

  3. Understanding Taxesand Tax Forms • The first form you will work with is Form W-4Personal Allowance Worksheet • It is filled out each time you begin a new job and/or if your family status changes • If you marry or have children, you will need to fill out a new W-4 • This form tells your employer how much money to withhold from your paycheck to pay the government your taxes • Withholding Taxes: the tax your employer takes out of your paycheck

  4. W-4

  5. Form W-4 • Line A: you are a dependent as long as you are living with someone and they provide most of the money for your care—they claim you as a ‘dependent’ • Line B: • Line C: Enter “0” at all times unless you and your spouse do not earn much combined income or your spouse does not earn anything – this makes that person a dependent

  6. Form W-4 • Line D:Does your salary provide for anyone else living in your household? • Line E:See “head of household” conditions • Line F:Child care that you are claiming • Line G:If you have a low income and have to care for children • Line H:Add up your numbers…you want this to be as close to 0 as possible • Be sure to completely fill out lower part of the W-4: • Print name • SS# • Full Address

  7. Form W-4 • Single, Married, Married, but withhold at higher Single rate – you are filing single so you will have more tax taken out of your paycheck • #5 – total number from above • #6 – Additional amount you want withheld – to make sure you pay enough • #7 – Exempt– saying you don’t make enough for the government to withhold any money. DO NOT use this unless you are absolutely sure you qualify

  8. Form W-4 • #7 – Exempt – you don’t earn enough income for the government to withhold any money from your paycheck. DO NOT use this unless you are absolutely sure you qualify! • You will have to pay a penalty of $500 if you earn more than you thought you would • Sign & Date • If you forget to sign, your tax filing is not valid!

  9. During the Regular Year • You do not need to keep track of your taxes-- that is what your employer does! • You may want to double check your pay stub to make sure that your tax deductions are being calculated correctly

  10. Form W-2 Wage and Tax Statement • This is sent to you by your employer – completely filled out! • Sent by January 31 • Make sure everything is correct and then use it to file your tax information for the IRS!

  11. Form W-2 • 2: Federal Income Tax Withheld: How much federal income tax your employer took out of your paychecks • 4: Social Security Tax Withheld: how much social security tax your employer took out of your paychecks • 6: Medicare Tax Withheld: how much Medicare tax your employer took out of your paychecks

  12. Form W-2 • Lines 15 – 20: information on state tax and local tax deducted from each paycheck • You will need a W-2 from each job that you have held this year, even if you don’t work there anymore!

  13. Form 1099-INT Interest Income • This is sent to you by your bank or financial institution. • It shows how much money you have made on interest on your investments • You must pay taxes on your interest!

  14. 1099

  15. Form 1099 • A copy is also sent to the IRS, so they know what the amounts are – you can’t lie! • The type of investment you have will determine whether you must pay taxes on the interest or dividends earned

  16. Filing Your Taxes • You must file you taxes by April 15 • Penalties for filing late! • You can file for time extension, if necessary • Ways to file: • Hire an Accountant:they do all the work and even send in the forms • Inquire about fees charged if accountant files • Fill out the forms yourself and send in • E-File:electronically file your taxes • Save money by filing your taxes yourself!

  17. Tax Terms • Voluntary Compliance: every citizen voluntarily files a tax return by April 15th • Tax Evasion: not reporting income or paying your taxes • Audit: IRS wants additional data or evidence about your return • Correspondence Audit: done by mail • Field Audit or Office Audit: meet with IRS agent in person • Can give someone else power-of-attorney to take your place • Can bring a tax expert for advise and support

  18. Federal Income Tax(Single taxpayer for 2006 Taxes) Annual Earnings Tax + Tax Rate Over • $0 – 7,550 $0 tax + 10% over 0 • $7,550 – 30,650 $755 +15% over $7,550 • $30,650 – 74,200 $4,220 +25% over 30,650 • $74,200 – 154,800 $15,107.50 + 28% over 74,200 • $154,800 – 336,550 $37,650.50 +33% over 154,800 • $336,550 or more $97,653.00 + 35% over 336,550 • Source: http://www.smbiz.com/sbrl001.html#pis06

  19. Federal Income Tax • How much would you owe in taxes if you earned ? ? ? • $10,000 $ • $80,000 $ • $150,000 $

  20. $10,000 • 10,000 – 7,550 = $2,450.00 • 2,450 * .15 = $ 367.50 • 755 + 367.50 = $1,122.50 • What if the government used a steady rate of 15%? • 10,000 * .15 = $1,500

  21. $80,000 • 80,000 – 74,200 = $ 5,800.00 • 5,800 * .28 = $ 1,624.00 • 15,107.50 + 1,624 = $16,731.50 • What if the government used a steady rate of 28%? • 80,000 * .28 = $22,400

  22. $150,000 • 150,000 – 74,200 = $75,800.00 • 75,800 * .28 = $21,224.00 • 15,107.5 + 21,224 = $36,331.50 • What if the government used a steady rate of 28%? • 150,000 * .28 = $42,000

  23. Basic Tax Forms • The following are common forms used by citizens to file their Federal taxes: • Forms 1040, 1040A, 1040EZ • Schedule A,B, or C • Download current tax forms @ http://www.unclefed.com/IRS-Forms/2001/HTML/p52710.html

  24. Form 1040 U.S. Individual Income Tax Return • Use this form if you want to itemize deductions or if you are a business owner • Use the Schedules with this document

  25. Form 1040A • Use this form if you have children, child care expenses, dependents

  26. Form 1040EZ • This is the easiest form to use! • Use the “EZ” if you have limited dependents/exemptions – usually if it is just you or maybe a spouse

  27. Tax Form Schedules • Schedule A: • Allows you to show where you spent your money and to get tax breaks on certain expenditures • Schedule B: • Shows interest and dividends for tax exemptions • Schedule C: • Used in businesses to show profit or loss • If you own a business, you will want to fill one of these out!

  28. Other Forms • There are many other forms that you can use for other exemptions and deductions • If you start having to use all of these forms, it is may be time to get some help! • Know when it is too much for you to handle

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