Taxes The Who, Why and How

Word Of the Day Deductions

The Who Who needs to file taxes? Anyone who pays income tax* * other situations can exists that would cause you to want to file taxes Did you work last year? Did you pay taxes? If you answered yes, then you should talk to your parents about filing

The Why The federal government has expenses To cover these expenses, they need revenue Revenue = Income The Governmental agency that is responsible for taxes is called the Internal Revenue Service The Internal Revenue Service is also known as the IRS Part of this revenue comes from payroll tax and Income tax Payroll tax and income tax make up as much as 80% of the revenue that the Federal government collects Your Federal income tax collected from your pay check is based on how many people you claim when you are hired at any given place and how much money you make In addition to Federal income tax, workers also pay FICA FICA stands for Federal Insurance Contribution Act The money that you pay into FICA goes to support Medicare and Social Security

Where does the money go? What do you think the government spends the most amount of money on? Take 2 minutes and discuss with your neighbor

What do you think? Do you think the government is spending their money wisely based on the information? Where would you spend less money? Where would you spend more money?

So what does that have to do with me filing taxes? In order to ensure that everyone pays their fair share of the tax burden, we have to file taxes The amount of money owed for taxes depends on your income and deductions Deductions are things such as college expenses, children and owning a home that reduce the amount of your income that is taxable The standard deduction for 2012 is $5,950 for a person filing single How is this number set?

What happens when I file? The first thing you must remember is to file by April 15th as tax returns are due by this date After completing your taxes, you may receive a refund Refunds occur if you paid too much in taxes after deductions The 2 nd scenario is you paid the correct amount after deductions and receive no refund The 3rd scenario is not paying enough taxes after deductions during the year and owing the government If you owe the government money, that money must be paid in full by April 15 th What happens if you don’t pay by April 15th

What do I need in order to file? Form W-2 W-2 is a form issued by your employer that informs you of your income and taxes paid for the year Form 1040ez 1040ez this is a form filled out by the tax payer or their preparer to report their earnings, taxes paid and deductions to the IRS 1040ez tax booklet 1040ez booklets inform the tax payer of their tax responsibilities based on their income Calculator

Activity Today you will get the opportunity to complete a tax return First we will complete a return as a group so we all have the opportunity to see how this is done