Federal Income Tax CONT 110

Terms Adjusted Gross Income Adjustments to Income Earned Income Tax Credit Estimated Tax Payments Exemptions Health Savings Account (HSA) Individual Retirement Account (IRA) Itemized Deductions Standard Deductions Tax Credits Taxable Income Total Income

Collect Information to prepare federal income tax Social Security Number Form W-4 (Employee’s Withholding Allowance Certificate) Form W-2 (Wage and Tax Statement) Annual 1099 form

Calculate federal income tax using Form 1040EZ Used when: – Filing status is single or married filing jointly. – You do not claim any dependents – You do not claim IRAs, alimony paid, bad debt deduction, moving expenses, educator expense deduction – You claim only the earned income credit – Your taxable income is less than $100,000 Taxable income = Total income – Standard deduction - Exemptions Taxable income = Total income – Standard deduction - Exemptions

Calculate federal income tax using Form 1040EZ Example: – Brian Phillips is single and a student with only part- time wages and a small amount of interest income. – STEPS: Calculate the adjusted gross income – $12,550 + $780 =$13,330 Calculate the taxable income – $13,330 - $8,950 = $4,380 Find the income tax in tax tables – $438 Subtract to find the difference between the tax and the amount of taxes paid to see if additional tax or refund is due – $1,005 - $438 = $567

Tax table

Calculate federal income tax using Form 1040A Used when: – You only had income from wages, tips, salaries, interest and ordinary dividends, capital gain distributions, taxable scholarship and fellowship grants, pensions, annuities, IRAs, unemployment compensation, taxable social security and railroad retirement benefits.

Calculate federal income tax using Form 1040A Katherine Grayson is single. Complete Form 1040A for Katherine Grayson using her Form W-2 and her Form NT. Katherine also has a $2,000 IRA contribution. – STEPS: Determine the personal exemptions – Katherine is single, so she has one exemption Calculate the total income – $18,950 + $752 = $19,702 Calculate the adjusted gross income by subtracting $2,000 IRA contribution from the total income – $19,702 - $2,000 = $17,702 Subtract the standard deduction from the adjusted gross income – $17,702 - $5,450 = $12,252 Subtract any exemptions to find taxable income taxable income – $12,252 - $3,500 = $8,752 taxable income Find the income tax in the tax tables $899 Subtract the tax from the amount of taxes paid to find the amount of tax due or refund due refund due – $950 - $899 = $51 refund due

Línea 7 Form 1040A Línea 38 Form 1040A

Línea 8A Form 1040A

Form W-2 Form INT

Tax table Form W-2

$438 Brian’s tax Línea 11 Form 1040EZ

$899 Katherine’s tax Línea 37 Form 1040A