What special day is it?

What happened to my paycheck???

Lets see what happens to our income $60,000/year $5,000/month $2,500/pay period (every other week) How much will we actually take home??

Step One: The Payroll Tax $4500/year $191.25/pay period $2308.75 NEW PAY Payroll Tax Rates Social Security tax rate 6.20% Medicare tax rate 1.45% Total payroll taxes 7.65%

The Payroll Tax: Purpose Social Security Tax FICA (Federal Insurance Contributions Act) Benefits for: the dependents of retired workers And for the disabled and their dependents Medicare Tax Medical benefits for certain individuals when they reach age 65. Workers, retired workers, and the spouses of workers and retired workers are eligible to receive Medicare benefits upon reaching age 65.

Step 2: Federal Income Tax

Progressive Tax Tax rate 25% 15,000/year; $625/paycheck DOWN TO $1683/paycheck Progressive Tax

Federal income taxes: Purpose 1. national defense, veterans, and foreign affairs 2. social programs 3. law enforcement 4. interest on the national debt

Step 3: State Taxes! Progressive Tax $3318/year $138.25/pay period FINAL PAY: $1544.75 Progressive Tax Tax Bracket (Single) [2] Tax Bracket (Couple) [3] Marginal Tax Rate $0+ 1.40% $20,000+ 1.75% $35,000+ $70,000+ 3.50% $40,000+ $80,000+ 5.53% $75,000+ $150,000+ 6.37% $500,000+ 8.97%

How much we actually make? Gross Pay - Social Security taxes - Medicare taxes - Federal Income tax withheld - State income tax - Misc: Retirement, Healthcare, dues, et cetera ________________________________ Net Pay

How much do we actually make?? $60,000/year GROSS is actually $37,182/year NET That does not account for other deductions…That is only taxes!! Insurance Deductions: health, dental and life insurance. Retirement Plan Contributions: .

Can we get any of that money back?

Fill out your W-4s Was it easy? What is the purpose of this form? determines how much federal income tax to withhold Is that weird? You can manipulate the amount you want withheld since more than your tax bracket impacts how much you pay in taxes

The W4 Filling out the W-4 Depends on 1. the employee's marital status, children, dependents 2. any additional amount the employee wants to withhold 3. any exemptions from withholding that the employee claims. More allowances = less taxes are taken out of paycheck; Less allowances = less money taken out Why???? http://apps.irs.gov/app/withholdingcalculator/ IRS withholding calculator

Lets fill it out again… Single, no children, no one else can claim you

Altering your taxes Why would you want to increase your allowances? Why would you want to decrease your allowances? Is there a “PERFECT” way to fill out this form? Split up class – half more deductions/half less Why might you want to decrease this number: -capital gains/interest on bonds cashed in/other incomes/get married and income increases Why might want to increase this number: -overpaying bc of house interest/credits childcare/tuition reimbursement credits Why would anyone have the government take out more money? Less money? Is there a perfect formula? Not exactly IRS calculator (can just take out additional amount)

What is next???

http://www. irs. gov/app/understandingTaxes/hows/mod01/sim_mod01_01 http://www.irs.gov/app/understandingTaxes/hows/mod01/sim_mod01_01.jsp

What do you need to complete your taxes?

Tax Time!!!! Tabulate your gross income W2 FORMS Interest earnings Bonuses/ tips Dividends Any other income!

What is an exemption? A way to “adjusting/decrease” your Gross Income Charity Student loan interest Moving expenses-work When you are done reducing your gross income, you have an: Adjusted gross income

Full List Deductions IRA Deduction Archer MSA Deduction Health Savings Account Deduction (see the Instructions for Form 8889) Student Loan Interest Deduction Moving Expenses Self-Employed Health Insurance Deduction Self-Employed SEP, SIMPLE, and Qualified Plans Penalty for early withdrawal of Savings Scholarship and Fellowship Grants excluded from income Domestic Production Activities Deduction Archer MSA – medical deductions saving for medical expenses Businesses with "qualified production activities" can take a tax deduction of 3% from net income. This is a tax break pure and simple. The more complicated the business, the more complicated the math for calculating the Domestic Production Activities Deduction. In a nutshell, businesses engaged in manufacturing and other qualified production activities will need to implement cost accounting mechanisms to make sure their tax deduction is accurately calculated. Manufacturing based in the United States, Selling, leasing, or licensing items that have been manufactured in the United States, Selling, leasing, or licensing motion pictures that have been produced in the United States, Construction services in the United States, including building and renovation of residential and commercial properties, Engineering and architectural services relating to a US-based construction project, Software development in the United States, including the development of video games.

What form do I use? 1040 EZ: standard deduction 1/3: itemize: 1040 (schedule A)