Lesson 1 Understanding Federal and State Income Taxes

Next Generation Science/Common Core Standards Addressed! u CCSS.ELA Literacy. RST.11Integrate and evaluate multiple sources of information presented in diverse formats and media (e.g., quantitative data, video, multimedia) in order to address a question or solve a problem. ‐ 12.7

Bell Work / Student Learning Objectives u Discuss why the tax system was started. u Explain general principles of taxation. u What is needed to fill out state and national tax forms?

Terms u Business expenses u Depreciation u Excise tax u Gross income u Internal Revenue Service u Retirement plans u Self-employment tax

Interest Approach Write down at least 20 things that you know tax money pays for. How important are each of these and how do they relate to you personally.?

Why do we need taxes? What would be different if taxes were not collected?

Common Uses of Taxes u schools u roads u payment of elected officials u police u military forces u public buildings u firefighters u bridges

1 st US Income Tax u The first US income tax was initiated in during the Civil War to help pay for war expenses, it was repealed in u The 16 th. Amendment to the US Constitution was ratified in 1913 establishing a permanent federal income tax.

What does a taxation program need in order to be successful?

Characteristics of a Successful Taxation Program u Convenient for the taxpayers to contribute to. u Flexible to the yearly changes in the economy. u Considers all expenses and charges taxpayers accordingly. u All citizens are taxed equally based on income.

How do I fill out tax forms?

Important Tax Sites u Internal Revenue Service Internal Revenue Service –1040 EZ1040 EZ –Schedule FSchedule F –Turbo TaxTurbo Tax

Taxation Terminology u Gross Income: All the income you receive in the form of money, property, and services not exempt from taxes. u Business Expenses: Deductions that are costs of operating your business.

Taxation Terminology u Self-employment Tax: A Social Security and Medicare tax for individuals who work for themselves. u Net Income, actual “in your pocket” income after deductions.

Taxation Terminology u Retirement Plans: Savings plans that offer tax advantages to set aside money for your own and your employee’s retirement. ERA, PERA, and similar funds are employer matched to a certain percentage. u 401K’s are investments taken out of your wages prior to taxation.

Taxation Terminology u Excise Taxes: Taxes that can be credited to you depending on the kind of fuel you purchased, whether it was taxed, and the purpose that the fuel was used for.

Review/Summary u Why the tax system was started? u Explain general principles of taxation. u Demonstrate how to fill out state and national forms.

The End!