WHAT YOU NEED TO KNOW Taxes

WHY ARE WE TAXED? Number 1 reason: to raise revenue Influence behavior Be fair

Taxes Fund Public Goods and Services National Defense Health Care for Elderly Social Services Public Education State and Local Police Financial Aid

Property Taxes Levied on property, especially real estate Can also be levied on boats, RVs, business inventories Fund schools, local services, welfare programs

Transaction Taxes Levied on economic Transactions (i.e. sales tax) Set on percentages or physical quantities Support state and local services

Payroll Taxes

State Dollars Where you tax money goes Social Services 21% Government Administrative 4% Education 30% Utility Expenditure 7% Transportation 7% Interest on General Debt 4% Public Safety 8% Environment and Housing 7% General Expenditure 5% Insurance Trust Expenditure 7%

The Federal Government Dollar- Where It Comes From Excise, Customs, Estate, Gift, and Miscellaneous Taxes 7% Personal Income Taxes 43% Social Security, Social Security, Medicare, and Unemployment and other Retirement Taxes 36% Corporate Income Taxes 7% Borrowing to Cover Deficit 6%

The Federal Government Dollar- Where It Goes Medicare, and other Retirement 32% DOD Military 19% Net Interest on the Debt 7% Homeland Security 1% Social Security 21% Other 19%

Tax Terms FICA-Federal Insurance Contributions Act. Funds Social Security, Medicaid, etc. Earned Income--Income that you earn through work or effort Gross Income--the amount you earn before any deductions

Tax Terms Interest Income: Income received from interest earned on a savings account or investments.  Form 1099INT Taxable Income: the amount of income that can be taxed Earned income + Interest Income = Taxable income Tax Liability--The amount of tax that you must pay.

Tax Terms Standard Deduction--An amount fixed by the government which taxpayers can deduct from their gross income before their tax liability is determined. Itemized Deduction--Deductions from your taxable adjusted gross income that is made up of deductions for money spent on certain goods and services throughout the year.

Tax Terms Dependent--A person who relies on someone else for support.  More dependents = more taken from each paycheck to meet tax liability

Tax Forms Form W-2 -- Shows your gross income for one year as well as the gross amount of federal taxes & social security withheld. Should be mailed to you by Jan. 31. Form W-4 -- A form that you complete to tell your employer how much money to take out of each paycheck in order to meet your tax liability. Fill out when you start a new job. Form 1099 INT--the form that indicates the amount of interest earned for the year

HOW DO WE FILE? OPTIONS: 1. Electronic Filing including telefile, efile using a tax agency or tax software 2. Paper File 3. Let a professional do it all Which is best for you?

Tax Rights Voluntary compliance- Everyone must file Right to appeal or review any tax decisions Right to confidentiality and privacy Help with unresolved tax problems Pay the exact amount-or payment plan

Factors Affecting Tax Liability Deductions: Expenses that can be deducted before determining taxable income Tax Credits: Amounts that can be deducted from taxes owed Tax Exemptions: A part of income on which no tax is imposed

WHEN DO WE NEED TO FILE? Deadline: APRIL 15 is always the day the taxes need to be filed by unless the 15th falls on a Sunday or holiday. Who needs to file? Any dependent who makes over $6, Any non-dependent who makes over $10,150 Someone who makes under the legal limit, but still wants to get their money that was withheld

Filing Options Electronic Filing: Telefiling-- Only those who receive the package can utilize this method. No pesky forms to fill out or mail Efile-- Often times this is free through a variety of agencies. Software can be bought and reused. Security-- Forms stored long-term online in a database. If you go through one of the approved IRS programs/agencies, there is virtually no risk. The risk is even less if you use a software program that stores the info on your computer

Filing Options Paper File--Most confusing, but is always free. Forms available in a variety of places, must be postmarked by April 15th. Professionally-- Fees are charged. Less chance of mistakes and the potential for a lower tax liability due to their knowledge.

WHERE CAN WE GO FOR HELP? Online help at irs.gov Tax agencies Teletax hotline IRS help line Library has tax professionals available on tax day