1. Managing Taxes

2. How do you think taxes will affect your lives?
Thinking….
What are Taxes?
How do you think taxes will affect your lives?
How will knowing that a certain portion of their income goes to taxes affect spending, saving and career choices?

3. Reason for taxes
_______________ are payments of money to the government that provide public goods and services for the community. programs, sanitation, law enforcement, and education.
Your city, state and country collect taxes to pay for _______________they provide, as well as operating costs.
Taxes are payments of money to the government that provide public goods and services for the community. programs, sanitation, law enforcement, and education.
Some examples of public goods are national defense, street lights, and roads and highways. Public services include welfare.
In some cases, the services may not apply to you, but you are still required to pay for them as being part of the greater community.
For example, people that do not have children are still required to pay taxes for teachers and schools.
They are really paying to keep their society stable.
___________________- previous years taxes must be filed by this date (can get extension)
In the United States, the responsibility for filing a tax return rests with the individual. This defines the concept of _________________________
The IRS has the legal right to audit your tax returns and supporting records for ____________years from the date of filing.

4. REASON FOR TAXES (CON’T)
Local
Local taxes pay for fire and police protection, schools, local social programs, parks, water and sewage systems, and other services you receive.
State
State taxes pay for colleges, prisons, social programs, parks, state police, government officials and workers, and other statewide services and programs.
Federal
Federal taxes pay for all the major government agencies, including the armed forces. The federal government also collects Social Security/Medicare (FICA), which goes into a fund upon which you can get benefits after you are 65-years old.

5. The government does not impose taxes on people and businesses because it thinks people have too
much money to spend.
Taxes are collected to pay for the many goods and services that are provided by the government.
Without the government, these goods and services would be unavailable to most people because they could not afford to pay for them by themselves.

6. The Federal Government Dollar – Where It Goes
Net Interest on the Debt 6%
Physical, human, and community development 9%
National Defense %
Social Security, Medicare, & Other Retirement 38%
Social programs %
Law Enforcement General Gov’t 2%
The Federal Government Dollar- Where It Comes From
Personal Income Taxes %
Social Security, Medicare,
&Unemployment and Other Retirement Taxes 24%
Borrowing to Cover Deficit %
Excise, Customs, Estate, Gift, and Miscellaneous Taxes 7%
Corporate Income Taxes 7%

7. Other Types of Taxes Sales taxes
In some areas in the United States, there is also a sales tax. You are charged an extra 5% on your purchases. If you buy $500 worth of goods in a month, you have paid an extra $25 in sales tax.
School Tax
Pays for buses, teachers & all school services
Property tax
If you own a home, you are required to pay a yearly tax, usually on the assessed value of your house. If you are renting, you are really paying a hidden tax that is part of your rent. If the property tax goes up, the landlord will increase your rent a comparable amount.
NOTE: school & property tax are not take out of your paycheck

8. Taxes on Purchases
State and local taxes are added to the purchase price of goods.
Excise tax is imposed on specific goods and services
Gasoline
Cigarettes
Alcohol
Tires
Air travel
Telephone service

9. Flat Tax vs Graduated Tax
________________: Everyone pays the same % rate
________________: the more $$ you make, the higher % you pay in taxes (based on a scale)
Which do you like better? WHY?

10. Tax Bracket for Individuals
IRS “Graduated”
Tax Bracket for Individuals
Tax Bracket
Single
10% Bracket
$0 – $9,075
15% Bracket
$9,076 – $36,900
25% Bracket
$36,901 – $89,350
28% Bracket
$89,351 – $186,350
33% Bracket
$186,2351 – $405,100
35% Bracket
$405,101 – $406,750
39.6% Bracket
$406,751+
Which do you like better- Graduated or Flat Tax? WHY?

11. SINGLE TAX EXAMPLE FOR $60,000 SALARY
Tax Bracket
Single
10% Bracket
$0 – $9,075
15% Bracket
$9,076 – $36,900
25% Bracket
$36,901 – $89,350
28% Bracket
$89,351 – $186,350
33% Bracket
$186,2351 – $405,100
35% Bracket
$405,101 – $406,750
39.6% Bracket
$406,751+
First $9,075 of income is taxed at 10%
Income between $9,076 & $36,900 of income is taxed at 15%
($36,900-$9,076)*.15
Remaining $23,100 (60,000-36,900) of income is taxed at 25% $
$4,
$5,775
Gross Income = $60,000
Taxes = $10,856.25
OVER ALL Tax Rate = 18% (10,856/60,000)

12. Your turn: calculate the SINGLE TAX owed on $90,000
Tax Bracket
Single
10% Bracket
$0 – $9,075
15% Bracket
$9,076 – $36,900
25% Bracket
$36,901 – $89,350
28% Bracket
$89,351 – $186,350
33% Bracket
$186,2351 – $405,100
35% Bracket
$405,101 – $406,750
39.6% Bracket
$406,751+

13. Reviewing Income Tax Tables
The income tax that you pay is not a flat tax but a graduated tax based on your income level.
Calculate the tax for a SINGLE person who makes $5,500
Calculate the tax for a MARRIED person who makes $148,500
Tax Bracket
Single
Married Filing Jointly
10% Bracket
$0 – $9,075
$0 – $18,150
15% Bracket
$9,076 – $36,900
$18,151 – $73,800
25% Bracket
$36,901 – $89,350
$73,801 – $148,850
28% Bracket
$89,351 – $186,350
$148,851 – $226,850
33% Bracket
$186,2351 – $405,100
$226,851 – $405,100
35% Bracket
$405,101 – $406,750
$405,101 – $457,600
39.6% Bracket
$406,751+
$457,601+

14. W-4
Tells government how much tax to withhold from your paycheck
This form ask for your
LINE 5: TOTAL NUMBER OF ALLOWANCES (amount to be withheld for taxes)
The lower the number, the higher the amount of taxes withheld.
Differs if married or single
The more allowances you claim, ______________________ will have withheld from your paycheck.

15. W-2 Earnings summary for work in the previous year.
Usually received by ________________.
Needed to file taxes by April 15 (unless filing for extension or the date lands on weekend).

16. REVIEW What is the difference between a Flat & Progressive Tax?
What date are taxes normally due for the previous year?
What is a W-4 form?
In the United States, the responsibility for filing a tax return rests with the individual. This defines the concept of__________________
The IRS has the legal right to audit your tax returns and supporting records for years from the date of filing.
What is a W-2 form? When is it sent out?

17. What is the Current Minimum Wage in NY?

18. FICA ______________________Act
FICA is a tax used to fund _________________________
Social Security is a federal program that provides benefits for retirees, the disabled and children of deceased workers.
Medicare is a federal program that provides hospital insurance benefits.
FICA is __________ percent of gross income (_____ percent for Social Security and ______ percent for Medicare)
SS is 6.2 % of the first $115,500 earned (2014)
Medicaid- .9% for over $200k

19. Reading Your Pay Stub Gross Pay (FORMULA: ___________________________)
Total Pay _____________________ deductions
Payroll Deductions
Amounts taken out of your paycheck
OPTIONAL: Retirement, health/vision/dental benefits, FSA, union dues, etc
MANDATORY:
Taxes
Federal Income Tax (varies with income: ranges 0-39%)
State Income Tax (varies with income & state: ranges 0 – 8.62%)
Social Security Tax (6.2%)
Medicare Tax (1.45%)
Net Pay
Total paycheck after _________________________.
FORMULA:
Gross Income
Payroll Deductions
Taxes
Federal Income Tax
State Income Tax
Social Security Tax
Medicare Tax
Net Income

20. Tax Freedom Day: How Many Work Days Does It Take To Fully Pay all your federal, state and local taxes?

21. Take home pay example

22. State Taxes on Earnings
State tax in all but 7 states
Alaska
Florida
Nevada
South Dakota
Texas
Washington
Wyoming

23. DETERMINING THE OVER TIME RATE
This OT rate is calculated as 1 ½ or 1.5 times the regular pay/hourly rate over 40 hours
IN THIS EXAMPLE: TAKE $12 x 1.5 = $18 FOR OT

24. CALCULATE OVERTIME RATE: (USE 1.5)
$11.50 regular rate= __________ overtime rate
$14.50 regular rate= ___________ overtime rate
$9.75 regular rate= __________ overtime rate
$21.40 regular rate= __________ overtime rate

25. Pete’s regular hourly wage rate is $15, and he receives a wage of 1
Pete’s regular hourly wage rate is $15, and he receives a wage of 1.5 times the regular hourly rate for work in excess of 40 hours. During a March weekly pay period, Pete worked 42 hours.
Compute the following amounts for Pete’s wages for the
current week.
1. Gross earnings.
2. FICA taxes. (Assume an 8% rate)
3. State income taxes withheld. (Assume a 2.0% rate.)
4. His only voluntary deduction is for group hospitalization insurance at $25 per week.
5. Net pay.

26. Sue Stein's regular rate of $15 per hour.
Her overtime rate is one and one-half times her regular rate for any hours which exceed 40 hours per week.
She worked 48 hours last week.Therefore, her gross wages were:
a. $720.
b. $600.
c. $780.
d. $1,080.

27. Match the correct letter to the correct number.
____1. Gross Pay A. money taken out for taxes and insurance
____2. Deductions B. the name of the person working
____3. Net Pay C. 100% of money earned
____4. Pay rate D. gross pay - deductions = take home pay
____5. Employee E. the amount earned each hour

28. Regular Hourly rate & you worked 40 Hours
USE THIS # TO CALCULATE THE OVERTIME HOURLY PAY RATE
Regular Hourly rate & you worked 40 Hours
$7.25 12
$9.80 8
$12.46
5.5

29. Pay periods
MONTHLY =
BI-MONTHLY =
WEEKLY=
BI-WEEKLY =
ANNUALLY =

30. PRACTICE

31. Let’s say you are single and work as a graphic artist in NY earning $30,000 a year. You are paid every bi-weekly. What is the gross amount that you earn each paycheck? _________ Now, we are going to look at some of the deductions that will be coming out of your paycheck. First, calculate your payroll (FICA) taxes per paycheck: Multiply your gross earnings by 6.2%. This amount will go toward Social Security. ____________ Multiply your gross earnings by 1.45%. This amount will go toward Medicare. ________ Subtract lines SS & MEDICARE ANSWERS FROM THE BI-WEEKLY PAYCHECK. ________________

32. REVIEW What percentage is FICA? What are taxes? What is gross pay?
What is the gross pay formula?
What is the formula to find the overtime rate?
What is net pay?
What is then NET PAY Formula:
What is FICA?
What percentage is FICA?

33. Reviewing Income Tax Tables
The income tax that you pay is not a flat tax but a graduated tax based on your income level.
Calculate the tax & Net Pay for a SINGLE person who makes $3,500
Calculate the tax & Net Pay for a MARRIED person who makes $145,500
Tax Bracket
Single
Married Filing Jointly
10% Bracket
$0 – $9,075
$0 – $18,150
15% Bracket
$9,076 – $36,900
$18,151 – $73,800
25% Bracket
$36,901 – $89,350
$73,801 – $148,850
28% Bracket
$89,351 – $186,350
$148,851 – $226,850
33% Bracket
$186,2351 – $405,100
$226,851 – $405,100
35% Bracket
$405,101 – $406,750
$405,101 – $457,600
39.6% Bracket
$406,751+
$457,601+