1. Taxes

2. American Tax System Constitutionally, every level has the right to tax your income (10 th amendment) The first income tax was created during the Civil War, but ended shortly after war debts were repaid The modern version of income tax in peace time began in 1913

3. American Tax System The American System is a progressive tax system…the more you make, the more they take –The more money a person makes, the larger % that will be taken out of their paycheck

4. American Tax System The American System is a progressive tax system…the more you make, the more they take –The more money a person makes, the larger % that will be taken out of their paycheck There have been recent proposals for a “flat tax” where everyone pays the same percentage regardless of income level

5. Year 2010 income brackets and tax rates Marginal Tax Rate [2] [2] SingleMarried Filing Jointly or Qualified Widow(er) Married Filing SeparatelyHead of Household 10%$0 – $8,375$0 – $16,750$0 – $8,375$0 – $11,950 15%$8,376 – $34,000$16,751 – $68,000$8,376 – $34,000$11,951 – $45,550 25%$34,001 – $82,400$68,001 – $137,300$34,001 – $68,650$45,551 – $117,650 28%$82,401 – $171,850$137,301 – $209,250$68,651 – $104,625$117,651 – $190,550 33%$171,851 – $373,650$209,251 – $373,650$104,626 – $186,825$190,551 - $373,650 35%$373,651+$373,650+$186,826+$373,651+ Federal Income Tax Brackets

6. Microeconomics When you get a job, you fill out a W-4W-4 –Determines how much $ to withhold to pay income taxes –If you are an independent contractor, your pay is not withheld and you are responsible to calculate your own tax burden –What are dependents?

7. Microeconomics By the end of January, your employer(s) will send you a W-2W-2 –This is a statement of how much you were paid, and what taxes were withheld –This is vital to completing your tax form If you have investments…you will get a 1099INT that shows how much interest you made 1099INT –Interest is income!

8. Microeconomics Determining your tax burden: –You can use a computer program like Turbo Tax, or use free online applications from the government –You may also use an accountant or a company like H and R Block

9. Microeconomics What effects your tax burden?

10. Microeconomics What effects your tax burden? –Dependents (kids) –Your income level –Interest paid on loans –Tax deductions Education expenses Business expenses Home upgrades Etc.

11. Microeconomics IF you have a lot of deductions…you will want to use a program or seek out a professional Most of you can use a 1040EZ form and fill out in under 5 minutes1040EZ

12. Microeconomics Reminders… –Federal gov’t may owe you money, but you may owe state and local gov’t –Some communities have reciprocity agreements that lessen local income taxes –Your parents will probably claim you as a dependent until you finish college –Taxes are due April 15 th every year

13. Fin

14. W-2 Form

15. 1099 INT

16. W-4

17. 1040EZ