“In this world, nothing is certain but death and taxes”
“The only difference between death and taxes is that death doesn’t get worse every time Congress meets”
April 15 th means Tax Day!!
Four purposes of taxes Raise $ to pay for gov programs Regulate certain types of business practices/products Income, sales, estate and property taxes are revenue taxes Excise taxes (on gas & alcohol) and tariffs are regulatory taxes
Types of taxes Progressive—the more you make, the more you pay (Federal Income Tax) Regressive—the less you make, the more you pay (Social Security, Sales Tax) Proportional—everyone pays the same (marginal tax-corporation pays on profits)
Tax Vocab
AGI Adjusted Gross Income All the $ you make over a year
Credits After you figure out what you owe, credits lower what you pay the IRS Credits are “dollar for dollar”
Deductions Expenses the IRS lets you subtract from AGI. Deductions lower taxable income
Standard Deduction Fixed dollar amount you subtract from income Married couples deduct $10,900; singles get $5,450
Itemized Deduction Expenses individuals can deduct Interest on mortgage payments, medical expenses, charity, etc
Exemptions Amount IRS lets you subtract from income Reflects people who depend on your income (your parents and you)
Taxable Income Your overall income after deductions and exemptions
Withholding “Pay as you earn” taxation Taxes taken out of paycheck while you earn it Better now than later
Voluntary Compliance Basis of tax system Citizens comply with tax laws I should have paid my taxes!
Tax Forms 1040—For people who claim dependents 1040A— More detailed than EZ—Easiest to fill out, can’t claim dependents