1. TAXES – What You Can’t Avoid!
Instructor Name
Class Title

2. Two Things You Can’t Avoid: Death and Taxes!

3. Understanding Taxes and Tax Forms
The first form you will work with is Form W-4 Personal Allowance Worksheet
It is filled out each time you begin a new job and/or if your family status changes
If you marry or have children, you will need to fill out a new W-4
This form tells your employer how much money to withhold from your paycheck to pay the government your taxes
Withholding Taxes: the tax your employer takes out of your paycheck

4. W-4

5. Form W-4
Line A: you are a dependent as long as you are living with someone and they provide most of the money for your care—they claim you as a ‘dependent’
Line B:
Line C: Enter “0” at all times unless you and your spouse do not earn much combined income or your spouse does not earn anything – this makes that person a dependent

6. Form W-4 Be sure to completely fill out lower part of the W-4:
Line D: Does your salary provide for anyone else living in your household?
Line E: See “head of household” conditions
Line F: Child care that you are claiming
Line G: If you have a low income and have to care for children
Line H: Add up your numbers…you want this to be as close to 0 as possible
Be sure to completely fill out lower part of the W-4:
Print name
SS#
Full Address

7. Form W-4
Single, Married, Married, but withhold at higher Single rate – you are filing single so you will have more tax taken out of your paycheck
#5 – total number from above
#6 – Additional amount you want withheld – to make sure you pay enough
#7 – Exempt – saying you don’t make enough for the government to withhold any money. DO NOT use this unless you are absolutely sure you qualify

8. Form W-4
#7 – Exempt – you don’t earn enough income for the government to withhold any money from your paycheck. DO NOT use this unless you are absolutely sure you qualify!
You will have to pay a penalty of $500 if you earn more than you thought you would
Sign & Date
If you forget to sign, your tax filing is not valid!

9. During the Regular Year
You do not need to keep track of your taxes-- that is what your employer does!
You may want to double check your pay stub to make sure that your tax deductions are being calculated correctly

10. Form W-2 Wage and Tax Statement
This is sent to you by your employer – completely filled out!
Sent by January 31
Make sure everything is correct and then use it to file your tax information for the IRS!

11. Form W-2
2: Federal Income Tax Withheld: How much federal income tax your employer took out of your paychecks
4: Social Security Tax Withheld: how much social security tax your employer took out of your paychecks
6: Medicare Tax Withheld: how much Medicare tax your employer took out of your paychecks

12. Form W-2
Lines 15 – 20: information on state tax and local tax deducted from each paycheck
You will need a W-2 from each job that you have held this year, even if you don’t work there anymore!

13. Form 1099-INT Interest Income
This is sent to you by your bank or financial institution.
It shows how much money you have made on interest on your investments
You must pay taxes on your interest!

14. 1099

15. Form 1099
A copy is also sent to the IRS, so they know what the amounts are – you can’t lie!
The type of investment you have will determine whether you must pay taxes on the interest or dividends earned

16. Filing Your Taxes You must file you taxes by April 15 Ways to file:
Penalties for filing late!
You can file for time extension, if necessary
Ways to file:
Hire an Accountant: they do all the work and even send in the forms
Inquire about fees charged if accountant files
Fill out the forms yourself and send in
E-File: electronically file your taxes
Save money by filing your taxes yourself!

17. Tax Terms
Voluntary Compliance: every citizen voluntarily files a tax return by April 15th
Tax Evasion: not reporting income or paying your taxes
Audit: IRS wants additional data or evidence about your return
Correspondence Audit: done by mail
Field Audit or Office Audit: meet with IRS agent in person
Can give someone else power-of-attorney to take your place
Can bring a tax expert for advise and support

18. Federal Income Tax (Single taxpayer for 2006 Taxes)
Annual Earnings Tax + Tax Rate Over
$ – ,550 $0 tax + 10% over 0
$7,550 – ,650 $ % over $7,550
$30,650 – ,200 $4, % over 30,650
$74,200 – 154,800 $15, % over 74,200
$154,800 – 336,550 $37, % over 154,800
$336,550 or more $97, % over 336,550
Source:

19. Federal Income Tax How much would you owe in taxes if you earned ? ? ?
$10,000 $
$80,000 $
$150,000 $

20. $10,000
10,000 – 7,550 = $2,450.00
2,450 * .15 = $
= $1,122.50
What if the government used a steady rate of 15%?
10,000 * .15 = $1,500

21. $80,000
80,000 – 74,200 = $ 5,800.00
5,800 * .28 = $ 1,624.00
15, ,624 = $16,731.50
What if the government used a steady rate of 28%?
80,000 * .28 = $22,400

22. $150,000
150,000 – 74,200 = $75,800.00
75,800 * .28 = $21,224.00
15, ,224 = $36,331.50
What if the government used a steady rate of 28%?
150,000 * .28 = $42,000

23. Basic Tax Forms
The following are common forms used by citizens to file their Federal taxes:
Forms 1040, 1040A, 1040EZ
Schedule A,B, or C
Download current tax

24. Form 1040 U.S. Individual Income Tax Return
Use this form if you want to itemize deductions or if you are a business owner
Use the Schedules with this document

25. Form 1040A
Use this form if you have children, child care expenses, dependents

26. Form 1040EZ This is the easiest form to use!
Use the “EZ” if you have limited dependents/exemptions – usually if it is just you or maybe a spouse

27. Tax Form Schedules Schedule A: Schedule B: Schedule C:
Allows you to show where you spent your money and to get tax breaks on certain expenditures
Schedule B:
Shows interest and dividends for tax exemptions
Schedule C:
Used in businesses to show profit or loss
If you own a business, you will want to fill one of these out!

28. Other Forms
There are many other forms that you can use for other exemptions and deductions
If you start having to use all of these forms, it is may be time to get some help!
Know when it is too much for you to handle