 Expense we must pay to allow your local, state, and federal governments to provide services  Services include Medicare, Medicaid, the military, the national debt, police and fire protection, road maintenance, parks, libraries, public schools, & safety inspections of foods, drugs, and other products

1. Taxes on Purchases 2. Taxes on Property 3. Taxes on Wealth 4. Taxes on Earnings

 Real estate property is a major source of income for local governments  Amount is based on the value of your real estate  In some areas of the country, state and local government may assess taxes on property like cars, boats, furniture, and farm equipment

 Taxes on earnings are collected each pay  They are “withheld” from your paycheck and sent to IRS  When you complete your income tax return and determine how much you owe, you determine if you already paid in too much or too little  You then either pay the IRS more, or you receive a tax refund

Assignment

W-2 Form Employer and Employee Identification (Boxes lettered A through F)  Box A: Employee's Social Security Number. This is your Social Security Number.  Box B: Employer Identification Number (EIN). This is your employer's unique tax identification number.Employer Identification Number  Box C: Employer's Information. This identifies the name, address, city, state, and zip code of your employer. The address may show your company's headquarters rather than their local address.  Box D: Control Number. This is a code that identifies this unique Form W-2 document in your employer's records. This number is assigned by the company's payroll processing software.  Box E: Employee's Name. This identifies your full name (first name, middle initial, and last name).  Box F: Employee's Address. This identifies your address, city, state, and zip code. If you have recently moved, the address might be a former address.

W-2 Form Numbered Boxes on Form W-2  Box 1: Wages, tips, and other compensation. Box 1 reports your total taxable wages or salary for federal income tax purposes. This figure includes your wages, salary, tips you reported, bonuses, and other taxable compensation.  Box 2: Federal income tax withheld. Box 2 reports the total amount withheld from your paychecks for federal income taxes. This represents the amount of federal taxes you have paid-in throughout the year. If you have several W-2 forms, add up the box 2 amounts and place the total on those tax form lines.  Box 3: Social Security wages. Box 3 reports the total amount of wages subject to the Social Security tax. For 2013, the Social Security tax is assessed on wages up to $113,700.Social Security tax  Box 4: Social Security tax withheld. Box 4 reports the total amount of Social Security taxes withheld from your paychecks. Normally, the Social Security tax is a flat tax rate of 6.2% on your wage income, up to a maximum wage base of $117,700 (for 2014).  Box 5: Medicare wages and tips. Box 5 reports the amount of wages subject to the Medicare tax. There is no maximum wage base for Medicare taxes.Medicare tax

 Box 6: Medicare tax withheld. Box 6 reports the amount of taxes withheld from your paycheck for the Medicare tax. The Medicare tax is a flat tax rate of 1.45% of your total Medicare wages.  Box 7: Social Security tips. Box 7 reports the amount of tip income that you reported to your employer. If you did not report tips to your employer, you will not have an amount in this box.  Box 8: Allocated tips. Box 8 reports any tip income allocated to you by your employer.  Box 9: No longer used.  Box 10: Dependent Care Benefits. Box 10 reports any amounts reimbursed for dependent care expenses through a flexible spending account or the dollar value of dependent care services provided by your employer.

 Box 15: State and State Employer's Identification. Box 15 reports your employer's state and state tax identification number.  Box 16: State wages. Box 16 reports the total amount of taxable wages earned in that state  Box 17: State income tax withheld. Box 17 reports the total amount of state income taxes withheld from your paychecks for the wages reported in Box 16  Box 18: Local wages. Box 18 reports the total amount of wages subject to local, city, or other state income taxes.  Box 19: Local income tax withheld. Box 19 reports the total amount of taxes withheld from your paychecks for local, city, or other state income taxes.  Box 20: Locality name. Box 20 provides a brief description of the local, city, or other state tax being paid.

 FIRST Look at your gross income Earned income-the money you receive for working Interest income- the interest you receive from banks, etc. Dividend income-the cash dividends you receive from investments

Gross income – exclusions (excluded income)=

 Look at your gross income minus your exclusions to see what is taxed  Then you may also have adjustments (deductions) Contributions to a retirement account or student loan interest SO..

Gross income MINUS income that is excluded (exclusions) Any adjustments/ deductions MINUS

NOW YOU HAVE DETERMINED YOUR ADJUSTED GROSS INCOME…

MINUS OR (choose the deduction that is higher)

SAMPLE TAX TABLE  We now know your taxable income  Simply look on a chart (Tax Table) to find out how much tax you owe the IRS

 A tax credit is an amount of money that can be subtracted directly from that amount of tax money you owe If you owe $300 in taxes and you have a tax credit of $100, then you only owe the IRS $200. ○ Credit for child ad dependent care ○ Lower income workers

1. Payroll withholding ($ taken out of every paycheck) At the end of year figure how much more you owe or how much you will get back Fill out a W-4 Form (next slide) 2. Estimated payments (if self-employed) Due April 15, June 15, September 15, and January 15

 Allowances are based on your marital status and whether you have dependents  Some people claim fewer allowances on their W-4 forms than they actually have, therefore MORE tax is withheld per pay  Claiming less allowances helps people get tax refunds