1. Federal Income Tax

2. Types of Taxes ___- a charge imposed by the government on people, entities, or on property in order to raise revenue. ___- a charge imposed by the government on people, entities, or on property in order to raise revenue. Revenue- The money the government has from the taxes it collects Revenue- The money the government has from the taxes it collects __________- Taxes that take a larger share of income as the amount of income grows __________- Taxes that take a larger share of income as the amount of income grows I.e. – Income tax I.e. – Income tax Regressive taxes- Taxes that take a smaller share of income as the amount of income grows Regressive taxes- Taxes that take a smaller share of income as the amount of income grows Based on percentage Based on percentage I.e. – Sales tax I.e. – Sales tax

3. Types of Taxes (cont.) -__________ Taxes- Flat rate taxes for which the rate stays the same, regardless of the amount on which the tax is imposed -__________ Taxes- Flat rate taxes for which the rate stays the same, regardless of the amount on which the tax is imposed Example: Property tax Example: Property tax

4. History of Taxes No income tax for many years No income tax for many years The __________ (1787) included the option to tax, but not to tax individuals directly The __________ (1787) included the option to tax, but not to tax individuals directly The ___________ brought a temporary income tax, but when the war debt was paid, the tax was dropped The ___________ brought a temporary income tax, but when the war debt was paid, the tax was dropped In 1862 Abe Lincoln signed a law that provided for progressive income taxes on wages earned due to the Civil War. When war debts were paid, the tax expired In 1862 Abe Lincoln signed a law that provided for progressive income taxes on wages earned due to the Civil War. When war debts were paid, the tax expired

5. History of Taxes (cont.) In 1909, Congress introduced the first permanent income tax with the 16 th Amendment to the Constitution In 1909, Congress introduced the first permanent income tax with the 16 th Amendment to the Constitution ____________ (1917) was paid for by income taxes ____________ (1917) was paid for by income taxes In _____, Franklin D. Roosevelt’s “New Deal” sought prosperity through taxation and redistribution In _____, Franklin D. Roosevelt’s “New Deal” sought prosperity through taxation and redistribution World War II (1939) brought increased taxes to finance the war. This set a precedent for the changing of tax rates we know today World War II (1939) brought increased taxes to finance the war. This set a precedent for the changing of tax rates we know today

6. IRS Internal Revenue Service (IRS)- An agency of the Department of the Treasury Internal Revenue Service (IRS)- An agency of the Department of the Treasury ____________- Collect Income taxes and enforce tax laws ____________- Collect Income taxes and enforce tax laws Headquarters- _____________ DC Headquarters- _____________ DC Seven regional offices that oversee 10 district and local offices Seven regional offices that oversee 10 district and local offices

7. Paying Taxes ____ Brackets- A certain tax rate you are charged based on the income range your wage fits into. Tax rates increase as taxable income increases ____ Brackets- A certain tax rate you are charged based on the income range your wage fits into. Tax rates increase as taxable income increases I.e. - 10% for the lowest tax bracket I.e. - 10% for the lowest tax bracket 35% for the highest tax bracket 35% for the highest tax bracket Current tax bracket for incomes between $35- $65K = 28% Current tax bracket for incomes between $35- $65K = 28% Tax ________- Failure to pay taxes; failure to prepare and file for income tax returns Tax ________- Failure to pay taxes; failure to prepare and file for income tax returns

8. Filing Tax Returns ____________ ____________ Single person Single person Married person filing a joint return Married person filing a joint return Married person filing a separate return Married person filing a separate return “Head of Household” (if you provide a home for people dependent on you) “Head of Household” (if you provide a home for people dependent on you) Qualifying widow with a dependent child Qualifying widow with a dependent child

9. Filing Tax Returns (cont.) Exemption- The amount you may subtract from your income for each person who depends on your income to live Exemption- The amount you may subtract from your income for each person who depends on your income to live I.e.- In a recent year, it excluded $3,000 from taxation I.e.- In a recent year, it excluded $3,000 from taxation Gross Income- All the taxable income you receive, including wages, tips, salaries, interest, dividends, unemployment compensation, alimony, workers’ compensation, etc. Gross Income- All the taxable income you receive, including wages, tips, salaries, interest, dividends, unemployment compensation, alimony, workers’ compensation, etc. __________- A financial institution pays the saver money for using their money __________- A financial institution pays the saver money for using their money __________- Part of corporation’s profits paid to stockholders __________- Part of corporation’s profits paid to stockholders Unemployment Comp- Compensates workers with pay until they find another job Unemployment Comp- Compensates workers with pay until they find another job __________- Money paid to support a former spouse __________- Money paid to support a former spouse Workers Comp- Pays workers for injury, illness or death Workers Comp- Pays workers for injury, illness or death

10. Taxable Income Deductions- Expenses the law allow you to subtract from your adjusted gross income to determine your table income Deductions- Expenses the law allow you to subtract from your adjusted gross income to determine your table income ________- A list of your deductions for taxable purposes ________- A list of your deductions for taxable purposes Adjusted Gross Income- Contributions to retirement accounts Adjusted Gross Income- Contributions to retirement accounts ______________- Stated amount that you can subtract from adjusted gross income instead of itemizing ______________- Stated amount that you can subtract from adjusted gross income instead of itemizing

11. Taxable Income (cont.) Taxable Income- Gross Income - ___________ = Adjusted Gross Income Adjusted Gross Income - Standard or Itemized Deductions - ____________ = Taxable Income

12. Preparing to File Once you have gathered your income and expense records, you can make a rough draft of your tax return Once you have gathered your income and expense records, you can make a rough draft of your tax return Study the tax booklet that accompanies the printed forms Study the tax booklet that accompanies the printed forms This contains the latest tax information you need in order to prepare your return This contains the latest tax information you need in order to prepare your return ______ the instructions carefully ______ the instructions carefully Take _________ of every deduction Take _________ of every deduction

13. Who Must File?

14. When to File? No later than _________ of the year after you earned income No later than _________ of the year after you earned income If late, you will ____ penalties and interest charges If late, you will ____ penalties and interest charges

15. Where to Begin? Choose a Form based on Income, Family Status, and Saved Receipts Choose a Form based on Income, Family Status, and Saved Receipts Save _________ for itemized deductions (Depending on the form you use) Save _________ for itemized deductions (Depending on the form you use) _____ employee withholding records (pay stubs) _____ employee withholding records (pay stubs) Prepare your tax return early (as soon as you receive your W-2 Form- a form which reflects income received/taxes taken out) Prepare your tax return early (as soon as you receive your W-2 Form- a form which reflects income received/taxes taken out) Once this __________ is gathered, prepare a tax form (or have it prepared for you) Once this __________ is gathered, prepare a tax form (or have it prepared for you) Hint- withhold just enough to cover the tax; adjust the number of exemptions you claim if you are way above or below Hint- withhold just enough to cover the tax; adjust the number of exemptions you claim if you are way above or below You are responsible for supplying accurate and complete information You are responsible for supplying accurate and complete information

16. Choosing a Form

17. W-2 Form

18. Filing Electronically For _________ who use Form 1040EZ or 1040A, the IRS allows electronic filing of tax returns and electronic payment of taxes due For _________ who use Form 1040EZ or 1040A, the IRS allows electronic filing of tax returns and electronic payment of taxes due You can file via _____________ by visiting www.irs.gov You can file via _____________ by visiting www.irs.gov www.irs.gov This allows you to pay ____________ using a debit card or credit card This allows you to pay ____________ using a debit card or credit card If the government owes you a refund, the Website promises quicker processing If the government owes you a refund, the Website promises quicker processing Print a copy of the tax return for your records Print a copy of the tax return for your records