Text of Chapter 5 TAXES!. Ch. 5.1: Taxes and Your Paycheck?
Chapter 5 TAXES!
Ch. 5.1: Taxes and Your Paycheck?
Bell Ringer- 2/23/15 What comes to your mind when you think of the word TAX ?
Payroll Taxes Placed on income earned by individuals Largest form of revenue received by government Amount taken out of each check varies- base on a persons annual earnings Paid to the government by individual employees and their employers. Medicare and Social Security
Income Taxes Taxes you pay on most types of income you receive. The amount paid by each individual varies based on their income
Payroll Tax vs. Income Tax Payroll Tax Includes FICA taxes and Income Tax Also includes amount paid by employer based on employees earnings Income Tax Federal Income tax deducted from paycheck
Pay Stub Largest Deduction Social Security
FICA Federal Insurance Contribution Act Law that requires workers and their employers to contribute to Social Security and Medicare Social Security is a program that helps provide benefits to those who have retired. Medicare provides health insurance for seniors over the age of 65 as well as certain people with disabilities
Withholdings Money that is withheld from your paycheck Enables government to collect taxes at a steady rate (each pay period) instead of at the end of the year You pay little tax with each paycheck, so you dont face a huge tax bill at the end of the year.
Gross Income/Gross Pay Amount earned before taxes have been withheld
Net Income/ Net Pay Amount you receive after withholdings are subtracted from your gross pay
Paystub Activity Pay Stub Activity Work on Paystub Activity 1 as class Complete Paystub 2 individually Social SecuritySocial Security
W-4 Form Form filled out when you are first hired at a company Provides information your employer needs to determine how much to withhold from your paycheck http://www.irs.gov/pub/irs-pdf/fw4.pdf
Allowances A number that reduces the amount of income withheld from your paycheck Claiming a lower number on your W-4 form will result in MORE money being withheld from your paycheck but also may mean you will get back more money at the end of the year. The lowest number you can claim is 0 Highest you can go up to is 9 but you need to show proof to IRS for this..
IRS Federal agency that collects income taxes Agency in the department of treasury Headquarters: Washington D.C. Each year the IRS calls thousands of taxpayers for an audit Examination of their tax return
Bell Ringer- 02/24/15 How do taxes benefit both you and the government? Think about this Kelly has $12.11 withheld from her paycheck for taxes if she didnt have this withheld, how much would she have owed at the end of the year? (hint- there are 52 weeks in a year!) $12.11 X 52 weeks= $629.72
Tax Return Set of forms a taxpayer uses to calculate their obligations (what they owe/dont owe) This is the only way you can get money back. (Usually during Feb-April) You are responsible for information on tax return, if it is incorrect you are liable!
Tax Refund If your tax return shows you paid more money in withholdings than you owed, you will receive a refund!
Taxes Owed If your tax return shows that your withholdings were not enough to cover the taxes you owe, you must send the remaining amount to the government.
Social Security Number Unique number assigned to you by the federal government No one else has the same number The government uses this number throughout your life to: Identify you as a taxpayer Keep track of your earnings and tax records Pay you social security benefit when you reach retirement
W-2 Form Summary of your earnings and withholdings for the year. You will receive a W-2 for each job you held during the year. When you file a tax return, you must include your W-2!
W-2 Form Employer Employee Wages/Tips Fed. Income Tax
W2 Form Vs. W4 Form W-2W-4 Used By: Employer reports wages earned by employee for the year Employee to report what they want withheld from their paycheck through selection of marital status and dependents Information found on form: Identifies information about the employee, the employer, and wages and deduction breakdowns for the employee for the year. Name, address, Social Security number---and withholding allowance information. How often is it filed? Once a yearAs many times as the employee would like- Always at beginning of employment
W2 Form VS. W4 Form W-2W-4 Who sees the form? Employer files form with IRS and state taxing authority. Employer also MUST give copies to employee at end of the year. Stays in hands of the employer- sometimes the IRS may request a copy. Who is responsible for completing the form? Employer- gives one copy to IRS and one copy to employee Employee is responsible for completing it. Employer is responsible for keeping a copy on hand
1099 Form If you have a savings account or any other investments where you earn money- you will receive a 1099 Form at the end of the year. Statement of the interest your bank paid on your savings that year
1040EZ Simplest Tax Return Form To qualify the following must be true: You are single or married filing jointly with spouse You have no dependents You and your spouse are under 65 yrs Neither you nor your spouse is blind Your taxable income is less than $100,000 You have earned no more than $1,500 in interest You have no other income besides wages, tips, scholarships, or unemployment
Dependent People who are supported financially Independent Someone who is not supported by anyone else financially
Forms, Forms, FORMS! W-4W-210991040EZ Determines how much to withhold from your paycheck. Given by yours employer. Summary of how much money you made at a particular company and how much tax was taken out of your paycheck. Form you receive at the end of the year that shows if you made money (interest) on an savings accounts. Also can be given if you were paid money (over $600) but not taxed. Tax form filled out at the end of the year to determine if you get a refund or owe money.
1040 EZ Scenarios Jonathon Jackson is a full time high school student. He has a part time job working at the local grocery store each day after school. Last year Jonathon earned $1,525. He is filling out an early tax return, and he is having his refund deposited directly in his Chase bank account in order to receive it as quickly as possible. His savings account number is 1234567890 and the bank routing number is 787878787. Jonathons parents claim him as a dependent on their federal tax return. Use the information given in the scenario and Jonathons W-2 to complete a 1040EZ form. 1040 EZ Form 2012 Tax Table
Deductions Expenses the law allows you to subtract from your adjusted gross income to determine you taxable income 4 kinds of deductions: 1. Business Deductions Traveling, meals, gifts, use of car, health insurance, use of home, education, employee pay, etc. 2.Adjustments IRS or Alimony payments Itemized/ Standard Exemptions You, your spouse, children
Examples Of Itemized Deductions Medical/dental expenses State and local taxes Property tax Mortgage interest Gifts to charity Losses from theft or property damage Moving expenses Investment expenses You cannot use the 1040EZ form if you are choosing to itemize your deductions!
Standard Deduction Specific dollar amount that you are allowed to subtract from your taxable income. A base amount of income that is not subject to tax and that can be used to reduce a taxpayer's adjusted gross income.
Standard Vs. Itemized Deduction Standard Set dollar amount- $9,500 (2012) Itemized Allows you to list expenses If your expenses add up to MORE than what the standard deduction would be, then you should choose to Itemize your deductions YOU HAVE TO CHOOSE ONE OR THE OTHER! YOU CANNOT DO BOTH!
Taxable Income Income figure used to determine your taxes Your adjusted gross income minus your Standard Deduction
How to fill out a 1040EZ!
Things you will need. 1040 EZ Form W-2 Form This is REQUIRED in order to fill out your 1040EZ 1099 Form If you have one! Tax Table
Step # 1: Fill In Your Basic Info! Name (first and last) Address Social Security Number