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Finance Unit 2

Finance Unit 2. Planning Your Tax Strategy. Benjamin Franklin. Only two things in life are certain: Death and Taxes. GOALS. Develop an awareness of how your tax status is a critical part of managing your financial future .

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Finance Unit 2

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  1. Finance Unit 2 Planning Your Tax Strategy

  2. Benjamin Franklin Only two things in life are certain: Death and Taxes

  3. GOALS • Develop an awareness of how your tax status is a critical part of managing your financial future • Discover the four main categories of taxes and identify the specific taxes in each category • Distinguish between tax deductions and tax credits • Ascertain why some people may pay more or less taxes than others • Select appropriate tax strategies for different financial and personal situations • Discern how tax revenues benefit you and where tax revenues go • Explain common taxes assessed as payroll deductions • Prepare individual income tax forms

  4. Your Subtopics Go Here 4 Categories of Taxes • Taxes on Earnings • Income Taxes • Federal Income Taxes • State Income Taxes • Local Income Taxes • Live or work within the city • Social Security and Medicare • http://en.wikipedia.org/wiki/Payroll_tax#Social_Security_and_Medicare_taxes • Taxes on Purchases • Sales Tax • http://www.sale-tax.com/Ohio • Excise Tax • Levied on specific goods and services • Gasoline, Cigarettes, Alcohol, Airline tickets

  5. Your Subtopics Go Here 4 Categories of Taxes • Taxes on Property • Real Estate Taxes • http://www.auditor.co.stark.oh.us/ • Taxes on Wealth • Estate Taxes • Unified Gift and Estate Tax system in the United States • http://corporate.findlaw.com/law-library/unified-gift-and-estate-tax-system.html

  6. Distinguish Between • Tax Deductions and Tax Credits • Tax Deduction • Reduces your taxable income --the amount of income you earned minus the deduction • Moves you into a lower tax bracket which means the amount of tax you will owe is lower • Tax Credit • An amount that directly reduces tax owed • Entered on your personal income tax form after amount of tax due is determined

  7. Tax Deductions • Medical and Dental Expenses • Taxes You Paid • Mortgage Interest You Paid • Gifts to Charity • Casualty and Theft Losses • Job Expenses and Most Other Misc. Deductions

  8. Tax Credits • Federal Earned Income Tax Credit (EITC) • For tax year 2012, a worker with no children who made less than $13,980 can receive up to $475. • Single parents with three or more children who made less than $45,060 are eligible for $5,891. • Married couples must file taxes jointly. • Couples earning less than $19,190 qualify for a credit of $475. • Those with three or more children qualify for $5,891 if they made less than $50,270. • The IRS estimates that more than 26 million citizens received over $60 billion in federal, refundable credits in 2011. • Refundable or Nonrefundable • Refundable- can get paid even if you do not owe income taxes! Must file to collect!

  9. Tax Credits (con’t.) • Hope Scholarship Credit • Lifetime Learning Credit • Earned Income Credit • Child Tax Credit • Child and Dependent Care Credit • Adoption Credit • Mortgage Interest Credit • Retirement Savings Contribution Credit • Elderly or Disabled Tax Credit • Energy-Savings Tax Credit

  10. Distinguish Between • Tax Avoidance and Tax Evasion • Tax Avoidance • By legally reducing your taxable income or by avoiding paying undue taxes can result in significant amounts of money that can be put to work to enhance your financial plan • Tax deductions, Tax Credits • Tax Evasion—Not Legal • Not paying taxes that you owe or by not filing a tax return to report what you owe

  11. Preparing Individual Income Tax Forms • W-4, W-2, W-WHO • http://www.irs.gov/Individuals/IRS-Withholding-Calculator • 1040, 1040EZ, & Tax Schedules • http://www.irs.gov/Individuals • IRS will process electronically filed returns in as little as 10 days but paper refunds will take 4-6 weeks.

  12. Word of Caution • Rapid Access Loan (1-2 Day Refund) • Get a loan in the amount of your refund in as little as 1-2 business days after IRS acknowledgment. • Loan must be approved and fees will be deducted from the loan. • $29.99 *Additional fees • Refund AmountFee • $300 - $35003% • $3501 - $4500 $105 In addition to the fees listed above, there is an account handling fee of $30.95 http://www.bbb.org/blog/2013/01/rapid-tax-refund-not-so-fast/

  13. Federal Tax Forms—1040EZ http://www.irs.gov/pub/irs-pdf/f1040ez.pdf Ohio Tax Forms—1040EZ http://www.tax.ohio.gov/portals/0/forms/ohio_individual/individual/2012/PIT_IT1040EZ.pdf City of Canton Electronic Income Tax Filing https://www.cantonincometax.com/2012filing/

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