Ch. 8.3 Paying Income Taxes

Identity Fraud increasing… http://www.nbcnews.com/tech/tech-news/thieves-stealing-tax-refunds-helps-boost-id-theft-47-percent-n506976 1/29/16

8.3 Paying Income Taxes 2 income tax responsibilities: Complete a W-4 when you start a job. (W-4 B4 start working) File a tax return at least once a year, if required and pay any additional tax owed.

Allowances: USE W-4 Determines how much tax to take out of your paycheck. Completed at hire. P. 201 If you’re being claimed as a dependent on someone’s tax return, you’ll want to claim 0 allowances. This is because your parents are claiming you as an exemption, rather than you claiming yourself. Read more: http://www.priortax.com/filing-late-taxes/what-are-allowances-on-a-w-4/#ixzz3mmkQc5Hy

Dependent: Anyone supported by taxpayer’s income. Why should you have fewer taxes taken out if you have more dependents? “allowances” on your w-4.

2010-2011--Three Sets Of Twins Born In Different Years 2010-2011--Three Sets Of Twins Born In Different Years * before midnight on new years eve /after midnight- new years day How does this affect parent’s tax return?

Allowances: USE W-4 “1” = bigger check “0” = smaller check **Higher allowances- Less taxes taken out of paycheck. “1” = bigger check “0” = smaller check

What if you need to change allowances?? You can change your W-4 Allowances at any time during employment. Ex: get married, have a baby

Get a bigger check? As of 2014 the standard deduction equals $6,200. Therefore, if a teenager expects to earn less than the standard deduction amount, and did not have any tax owed for the prior year, the teen can write "exempt" on line 7 of the Form W-4 and no federal income tax will be withheld. You will still have to Social Security and Medicare deducted from paychecks. Do not have to file 1040ez. Read more: Do Teenagers Have to Withhold From Paychecks? | eHow.com http://www.ehow.com/info_8718274_do-teenagers-withhold-paychecks.html#ixzz2K41Rm2xj

Would you rather have more taxes taken out of checks & Get bigger refund? Or have less taken out of paychecks with less of a refund or possibly have to pay more taxes after your return is filed?

Avg. Tax Refund $3000.00 Financial advisors argue the point that by allowing the government to knowingly collect more in tax from you during the year, you are, in effect, giving Uncle Sam an interest free loan.

A more wise investment may pay off later… For example, reducing your withholding by $3,000 annually means that for the average taxpayer, you will not receive a refund, but you will not owe any taxes either. That's an extra $58 per week, or about $250 per month you have access to. Investing that money into a mixture of stocks, bonds or precious metals, with an average return of 6 percent, would yield an inflation-adjusted amount of $70,000 after just 10 years. Why let the gov’t borrow your money interest free?

Tax Freedom Day April 28th…the day Illinois residents have earned enough money to pay off their tax bill for the year. (2014) The 7th latest day in USA. MO: April 11th. Tax foundation.org

What do you need to file 1040ez tax return? W-2– How many will you receive? Do you have a savings account? Then you will also get a FORM 1099. Misc. income reported. Interest from account Prize value

Tax Deduction What do they do? reduces the amount of taxes owed. Ex: Make $60,000. Gave $5000 to charity. You are taxed on $55,000. 2 main types of deductions- Choose one or the other…

Itemized vs. Standard Tax Deductions – Which One Should You Take?

2014 Standard Tax Deduction standard tax deduction is easier method. it’s simply a fixed number set each year just have to write it down on your tax form . Nearly 2 out of 3 taxpayers take the standard deduction Single   $6200 Married, Filing Jointly    $12,400 Married, Filing Separately   $6,200 Head of Household  $9,100 Blind or over 65 and married add:   $1,150 Blind or over 65 and single/head of household add:     $1,450

2014 Itemized Tax Deductions: But if you think you may have tax deductions bigger than the standard deduction it may make sense to itemize, even though it will require better record keeping and a little more work Can not use 1040EZ tax form if itemizing deductions. Single   $6200 Married, Filing Jointly    $12,400 Married, Filing Separately   $6,200 Head of Household  $9,100 Blind or over 65 and married add:   $1,150 Blind or over 65 and single/head of household add:     $1,450

Itemized Tax deductions: Examples include: Mortgage interest. Charitable contributions. Property taxes. State and local income taxes. Medical expenses that exceed 7.5% of your adjusted gross income. Various miscellaneous expenses that exceed 2% of your income such as: union dues, tools and supplies needed for work, tax preparation fees, some legal fees, and many more.

Single person For 2014 You could take Standard Deduction of $6200 Or show receipts for Itemized deductions greater than $6200. **Must use one or the other, not both.

Missed deductions can be the most costly…. About 48 million of us itemize on our 1040s -- claiming more than $1 trillion worth of deductions. $1,000,000,000,000 Another 92 million taxpayers claim about $700 billion worth using standard deductions $700,000,000,000 http://www.kiplinger.com/features/archives/the-mostoverlooked-tax-deductions.html#ixzz1XEFxeqJH

Tax Credits – “bonus” Your tax form shows you owe $9,000 in taxes. Examples: Your tax form shows you owe $9,000 in taxes. tax credit of 500 Now owe $8500

Tax Credits – “bonus” $500 tuition credit (ex: mater dei) Examples: $500 tuition credit (ex: mater dei) $1000 credit for each dependent child- 16 yrs by dec. 31, 2014. American Opportunity Tax Credit up to $2,500 on the first $4,000 of qualifying educational expenses, which include course materials as well as tuition. 2009-2010 First time homebuyers tax credit Up to $8000 credit Why was this credit created??

Why are tax credits better than tax deductions?

What is a W-2? When do you get them? By Jan 31. INFORMATION ON W-2 should Match your last pay stub of the year.

When are tax returns due?

Why is it important for your parents (and you) to get 2015 taxes completed before March 2016?

Priority deadline Feb 28th

1040EZ “Easy Form” Use the 1040EZ if: • Your taxable income is below $100,000 • Your filing status is Single or Married Filing Jointly • You and your spouse – if married -- are under age 65 and not blind • You are not claiming any dependents • Your interest income is $1,500 or less Using Standardized Deduction.

When do you get your money? Check the Status Online The fastest and easiest way to find out about your current year refund is to go to IRS.gov and click the “Where’s My Refund?” link at the IRS.gov home page. To check the status online you will need your Social Security number, filing status and the exact whole dollar amount of your refund shown on your return. Check the Status By Phone You can check the status of your refund by calling the IRS Refund Hotline at 800–829–1954. When you call, you will need to provide your Social Security number, your filing status and the exact whole dollar amount of the refund shown on your return.

IRS Health Care Tax Tip This year, there are some changes to tax forms related to the Affordable Care Act. Along with a few new lines on existing forms, there will also be two new forms that will need to be included with some tax returns. new lines on Forms 1040, 1040A, and 1040EZ related to the health care law.

Fine for no health insurance:  2015 taxes: the greater of $325 or 2 % of adjusted gross income.  Ex: MAJI = $40,000 = fine $________ 2016 taxes $695, or 2.5 % of adjusted gross income, whichever is greater. Ex: $40,000 income $______________ From 2017, the minimum tax penalty per person will rise each year with inflation.

Reviewing key terms/ideas page 206 Answer questions 1-13. Due Tuesday. http://tinyurl.com/pvyk5e9