1. Tax Forms & Deductions One day you are going to miss my PowerPoints
Mr. Rosenstock
Economics
San Fernando High School

2. Net Income vs. Gross Income
Gross income is the total amount a worker is paid before any required or voluntary deductions are made
Net income, also called “take home pay,” is the amount a person receives when he/she cashes or deposits his/her check. It is the remaining amount after deductions are made

3. Gross Income
- Deductions
= Net Income

4. Required Payroll Deductions
By law, employers must pay taxes deducted from employee paychecks
The most common taxes are federal and state. Some cities have their own local taxes
In addition, most employees have to pay a Social Security Tax (FICA), and Medicare tax contribution with each paycheck

5. Voluntary Payroll Deductions
Voluntary deductions are money you choose
to deduct for various purposes – examples include:
Health Insurance
Retirement Savings
Union Dues
Charitable Contributions
Voluntary deductions are made pre-tax. That means they
are taken from your check before taxes are deducted (this
saves you $$)

6. What are taxes?
Taxes are required contributions to state revenue, levied by the government on personal income and business profits or added to the cost of some goods, services, and transactions

7. State & Federal Income Tax
PDF of 1040 form

8. (Federal Insurance Contributions Act)
Social Security
The Social Security Tax is also
called the FICA tax
(Federal Insurance Contributions Act)
Social Security taxes provide the
following benefits to employees
and their dependents:
Retirement benefits
Benefits for the dependents of retired workers
Benefits for the disabled and their dependents

9. Medicare
The Medicare tax is used to provide medical benefits for certain individuals when they reach age 65
Workers, retired workers, and the spouses of workers and retired workers are eligible to receive Medicare benefits upon reaching age 65
Irs.gov

10. Other Taxes
Property tax
Sales tax
Gasoline tax
Local/City taxes

11. What is tax money used for?
Bridges
Road maintenance
Research
Education
Armed services, national defense, veterans, foreign affairs
Retirement income for elderly
Social programs
Law enforcement
Interest on the national debt

12. Tax Forms
Federal Tax
I-9
W-4
W-2
1040EZ
California State Tax
540 2EZ

13. I-9
All employees must complete this form and provide valid original identification
You are not eligible for pay until Payroll Services receives an I-9
The purpose of this document is to show that each new employee hired after 1986 is eligible to work in the United States

14. The purpose of this form is to document that each new employee (both citizen and noncitizen) hired after November 6, 1986,is authorized to work in the United States.
PDF of I-9

15. W4
You use W-4 Employee's Withholding Allowance Certificate Form to establish your withholding allowances for Federal income taxes.
Complete Form W-4 so that your employer can withhold the correct federal income tax from your pay. Consider completing a new Form W-4 each year and when your personal or financial situation changes.
PDF of W-4

16. What is a “Withholding Allowance?”
Employees claim exemptions on the tax form (W4)
Employers use to determine how much of an employee’s pay to subtract from his/her paycheck to send to the tax authorities (IRS or Franchise Tax Board in CA.)
The more allowances you claim, the less income tax will be withheld from your paycheck
The fewer allowances you claim, the more income tax will be withheld from each paycheck

17. Exemption: An exemption is a deduction allowed by law to reduce the amount of income that would otherwise be taxed
the IRS allows tax filers to claim $4,000 for each of their allowable exemptions
Personal exemption: You can put one exemption for yourself if nobody else can claim you as a dependent
Dependent exemption: If you have dependents you may claim one for each dependent
Dependent: Children or family members who depend on you for financial support

18. Less chance of tax refund Greater chance of tax refund
Higher # =
less $
withheld
Lower # =
more $
withheld

19. W-2
Form W-2 shows all taxable wages you received during the calendar year and all taxes withheld from those wages
The form serves as an annual report that enables you to file your personal income tax return with the Internal Revenue Service
This is the form you use to fill in and complete your tax return
Your employer will give you this form around February of each year, so you can complete your tax return by April 15
PDF W2

21. 1040 EZ
Similar to the 1040 income tax form, 1040EZ is a faster and easier way to file your taxes
This form is only eligible for people with income less than $50,000 and interest income of $400 or less
PDF of 1040 EZ form

23. California Form 540 2EZ
This is the form most of you will use to file your taxes with the state
Eligibility to use:
CA resident
Single / Married / RDP (Registered Domestic Partner)
Income from all sources less than $100,000
Exceptions:
You are a dependent of another taxpayer AND:
Have dependents of your own OR
Earn less than $13,679
You will then use Form 540

25. Student Loans
When you finish college you need to take care of any student loans you received
You can deduct up to $2,500 of student loan interest paid each year
Your modified gross income cannot be more than $80,000
Only the person whose name is on the loan may take the deduction
The loan must be from an accepted institution (not your folks)
Do NOT delay paying a loan! – they keep accruing interest!