1. Ch.5 Taxes: How Much of Your Income Will You Keep?
5.1 Taxes and Your Paycheck
5.2 File a Tax Return
5.3 Taxes and Government
5.4 Government and Spending

2. 5.1 Taxes and Your Paycheck
5.1 Vocabulary Words
Directions: Write each word with the full definition. Then write a sentence using the vocabulary word.
Payroll tax –
Income tax –
Federal Insurance Contributions Act (FICA) –
Withholding -

3. 5.1 Taxes and Your Paycheck
5.1 Vocabulary Words
Directions: Write each word with the full definition. Then write a sentence using the vocabulary word.
Payroll tax –
Income tax –
Federal Insurance Contributions Act (FICA) –
Withholding -

4. 5.1 Taxes and Your Paycheck
Payroll Taxes
Are placed on income earned by ________
Amount based on individual’s total earnings & tax laws that apply to type of income
Paid to government by individual employees and their ________________________
Income taxes – pay on most types of income you receive.
Not a fixed ________________________
Share varies, depending on each taxpayers financial & family situation
In 2008, ranged from 10 – 30%
FICA – law that requires workers and their employers to contribute to Social Security and ____________________________
Withholding
Income withheld from paycheck goes to prepay federal income tax & social insurance _____________________
Makes sure government collects taxes at steady rate & more likely people will pay taxes
Your Paycheck Stub
Shows gross income & withholding
Gross Income –
Net Income –
Shows what else was withheld

5. 5.1 Taxes and Your Paycheck
Allowances
worksheet provided with W-4, tells how to calculate # of allowances to ___________________________
More __________________ claimed, smaller amount withheld will be
Will not change amount of taxes owed
If do not pay enough in taxes, then owe at end of year
Adjusting Your Allowance
W-4 does not consider special situations
Withholding Too Much
Students often have too much withheld because work more during summer
Summer you may work 40 hrs so percentage based on that for whole ________________
Withholding Too Little
Allowance calculated may result in too little _________________________________
Can avoid paying large bill by:
Sending extra tax payments to the IRS
Claiming fewer allowances
Specifying extra amount to be withheld from each paycheck on your ___________
Form W-4
Fill out when you are hired for a job
Required by __________________
Gives info needed to determine correct amount to withhold from check
Your Responsibility for Proper Withholding
You’re responsible for consequences if form is ______________________
If amount paid to government not enough, then you owe at end of year
Wkst. – fill in W-4 form

6. 5.1 Taxes and Your Paycheck
Over withholding as a Way to Save
Some choose to “over withhold” as a way to _________________
Claiming too few allowances means a refund at end of year
Not good from financial point of _______________________
Because if you put that money in a savings account, you make money or interest off of it.
Reduce withholding to be more in line with what owed by claiming additional _____________________
Goal – make withholdings almost exactly equal to what you ____________
Home Work – p. 162, Questions #1 - 7

7. 5.2 File a Tax Return Tax Return – Form W-2 – Form 1099-INT –
Form 1040EZ
Dependent

8. 5.2 File a Tax Return 15. Deduction – 16. Social Security Number –
Taxable Income -

9. 5.2 File a Tax Return Income tax forms
Your Income Tax Return
If you have income, you must file a tax ________
Income more than just wages
All income you receive is ________________
A tax return is a set of forms to calculate obligations
Not required to fill out if earned less than minimum ______________________
Shows whether you owe the government or they owe you
Sources of Information for Your Tax Return
Form W-2
Must have from employer by January 31st
Will get for each job you hold for the fiscal _______________
When filing, you get a copy and the IRS gets a copy
If you do not file, IRS will let you ________
Form 1099-INT
Will receive from bank stating what interest you earned from _________ __________
This is all a younger person usually needs
Income tax forms
The EZ way – must meet __________
You are single or married filing jointly with your spouse
No __________________
You and spouse under ________
Neither you or spouse are blind
Have taxable income of less than $_____________________
Earned no more than $1,500 in interest
You had no income other than wages, interest, tips, scholarships, or unemployment ___________
Form 1040A & 1040
May use if :
Older
Have children
Invest in stock __________
Allows you to list or itemize deductions to reduce amount you owe
967_file-1040ez-dependents- worksheet.html

10. 5.2 File a Tax Return How to Complete a 1040EZ Identify Yourself
Need name, address, and social ___________ _____________
Below ID number, is checkbox presidential elections – check box to contribute to ______________
Income
Total Wages, Salaries, & Tips
Income received for over one _______________
Calculate total earnings from all W-2 forms
Taxable Interest Income
Fill in amount of interest reported on your ___________________
Unemployment Compensation
Fill in amount of any unemployment compensation received
Adjusted Gross Income
Add income from lines 1, 2, & 3 together = adjusted ___________ _____________
Record on line 4
Determine Your Deduction
If parents claim you as dependent, you cannot claim
If no one else claims you, enter the amount ____________________.
Forms allow tax payers to deduct those they support
Reduces amount of income on which they must pay ________________
Standard deduction – amount that all tax payers may subtract from adjusted gross income
Amount varies according to filing status
The form will tell you what to do depending on filing ______________________

11. 5.2 File a Tax Return Total Payments
Your Taxable Income
Line 5 subtracted from adjusted gross income = __________ __________
This is the income figure used to determine your taxes
Payments and Tax
Federal Income Tax Withheld
The next step on form that goes on line 7
Total withholding for year is in box 2 on your ____________ for each job
If had more than one job, need to add up all of box 2’s
Earned Income Credit
Use if have low _______________
Use line 8a
Treated as if an additional tax _______________________
Total Payments
Line 9 – will add withholdings and earned income ________
Result is total amount of taxes already paid
Tax - pdf/i1040tt.pdf
1040EZ contains table that tell you your total tax for year
Taxable income recorded on line _____________
On table, locate two numbers within your _____________ income falls.
Then find, in the next column, what applies to youof a

12. 5.2 File a Tax Return Math of Money, p. 169
Use the tax table on p Your W-2 form reports that you made $35, Your W-2 form also reports that $4,053 was withheld from your wages for federal income tax. You receive a INT from your bank that tells you your interest income was $281. You are single and are not claimed by any other person as a dependent.
How much is your adjusted gross income?
_______ + ________ = ______
How much is your taxable income
________ - ________ = ______
*Use this answer to do answer # 3
What is your total tax for the year
*use the tax table on p. 168
What is the amount of your payment or refund?
_______ - ________ = ______

13. 5.2 File a Tax Return Refund Sign Here
Deposit Your Refund Electronically
have option of depositing electronically into checking or savings ________________
You need the routing number, banks electronic address for fund transfers, to have directly deposited
Also need savings/checking _________________
Amount You Owe
If withholding is less than tax calculated for line 10, you would record number on line 12. This is amount you _________________
Sign Here
Must sign name with ___________ hand writing
Must write in date
When signing, saying that you are who you say you are
Check for Accuracy and File Your Return
If a mistake is made, then you may have to pay a penalty or receive a lower ____________________________
If owe money, write a check to IRS or give credit card number
If paying with credit card, may be charged additional fee of __________%
The due date is April _______ unless falls on Sunday or a holiday

14. 5.2 File a Tax Return Self-Employment Tax Schedule C
People who work for themselves pay ___________ _______
Paying on a Quarterly basis
Must earn more than $400 in a year
Must use form ______________
Must pay every 3 months
Up to you to remember to pay
Schedule C
Required to attach schedule C because of limited _____________
Must keep detailed records of business expenses
The amount determined as net of loss on form written on line 12 of _____________________
Self-employed pays same taxes as __________________________
Difference is self-employed have to withhold their taxes and pay ________________________

15. Assignment: Do questions 1 – 6 on page 172
5.2 File a Tax Return
Electronic Filing
May file _________________
More than 60% filed online in 2006
Takes 3 weeks or less to get refund ______________
Can purchase software to do it on own(ex. Quicken, Tax Pro)
There are also ______ ______
Can get tax refund loan
They give you less than ____________ from refund, and take whatever you owe when comes in
Assignment: Do questions 1 – 6 on page 172

16. 5.3 Taxes and Government Sales Tax - Property Tax – 20. Excise Tax –
21. Estate Tax –
22. Gift Tax

17. 5.3 Taxes and Government
23. Business or License Tax – 24. Customs Duty or Tariff -

18. 5.3 Taxes and Government Social Security and Medicare
Contributions to Social Security
FICA regulations – wages taxed at _________
Collected on gross income up to max level & adjusted for inflation each year
2008 – maximum income taxable was $____________________
Contributions to Medicare
1.45% taken
total percentage for both is __________%
Employers Contribution
Match ___________________
for each dollar up to max of 15.3 cents – employee=7.65, employer=7.65
_____________must pay all of 15.3 cents
half payments can be subtracted from adjusted gross income to reduce income taxes
Sources of Government Revenue

19. 5.3 Taxes and Government Classifying Taxes Taxes and Income
Three different ways to group taxes
_________________
Every taxpayer should be treated equally
Benefit Principle – those who use gov’t services should pay for it(ex. Toll road)
Ability-to-pay principle – larger income pays larger share
Ex. Fed. Gov’t – range ___ - ____% based on amount made
Taxes and Income
Progressive taxes
Take larger share of larger incomes, ex. Salary went from ________ to ___________
Regressive Taxes
Take smaller share of higher incomes than ___________
Ex. Louisa make 16,000 per year, Ray makes 45,000 per year. Both buy cars for 10,000 at .08% sales tax. This takes 5% of Louisa’s income vs. 1.8% of Rays
Proportional Taxes
take same share of all ______
No perfect examples of this in our country
The only difference between the three is the ____________ of different incomes that it takes

20. 5.3 Taxes and Government How Taxes are Collected Type of Taxes
Direct Taxes – income and property paid directly to ______________
Indirect Taxes – taxes included in the cost good or __________ = rent
Pay-as-You-Earn Taxes – paid as you earn income, ex = Federal Withholding taken out at every ________________________
Type of Taxes
Income Taxes – states and cities impose income taxes patterned after Federal System
Difference is tax _______________
2. Sales Taxes – taxes added to the price of goods & services at time of _________________
Percentage of cost of each purchase
Paid when ___________ food, gas, etc…
Divided between local and state governments
Property Taxes – tax on value of real property
Gov’t estimates value of land, structure, etc…
Tax is percentage of _____________
Used by local governments & schools
Can be added to house _____________(called escrow account)

21. - Answer questions on p. 178, #1-4
5.3 Taxes and Government
Excise Taxes – collected on sale of specific goods and ______________.
Ex. Tobacco, gasoline, & alcohol
Included in the price
Estate and Gift Taxes
Estate – when a person dies, property may be inherited by those legally ________to the estate
Only estates of a certain amount and higher are _____________________
Gift – giver of gifts may have to pay if $12,000 or over as of 2008.
Tax increased at times due to inflation
Business and License Taxes
To operate certain businesses, must have license, permit, or stamp.
Tax is paid for certification, which may have a ___________ (ex. Doctors, etc…)
Customs Duties and Tariffs
taxes to control the flow of products imported into the ________________
Imposed on some imports
Results in some items from abroad to be sold at _____________ prices than they otherwise would be
Assignment
- Answer questions on p. 178, #1-4

22. 5.4 Government Spending The Power to Influence Government Spending
Used to influence consumers’ buying _________________
Taxing means fewer people will buy it
Example – “Sin” taxes on legal goods that are bad for your health. What item is taxed like this? ____________________
Tax Cuts
Lower taxes = more beneficial choices
In 2008, President Bush led congress to give a tax rebate to encourage consumers to ____________________
High unemployment areas reduced property taxes for businesses
Can also deduct because donated to ________________________
Government Spending
Federal gov’t spends or transfers more than $2.65 ____________ each year
State & local spend half as much
Your cost = $___________ per year
Most spending pays for goods and services that benefit all Americans
Public Goods – roads, schools, national defense, etc…
Federal tax dollars used in ____ major areas
Vocab Definition & Sentence
25. Public Good -

23. 5.4 Government Spending Types of Federal Spending Debt Reduction
Social Security, Medicare, and other retirement programs - _____%
National Defense – ______%
Social Programs, such as food stamps and unemployment – _______%
Physical, Human, and community development(education, general science, & space program) – __________%
Interest on National Debt – ______%
Law Enforcement & general government – ____%
Debt Reduction
Late 1990’s thru early 2000’s had tax _______ used to pay down national debt
By 2002, fed. Gov’t spending more

24. 5.4 Government Spending Assignment
What State and Local Governments Provide
Building and maintaining ________
Operating police and fire ________
Maintaining a criminal justice system
Building and staffing schools
Building and operating state colleges and _____________
Supporting medical facilities
Constructing and operating sewage treatment ____________
Operating unemployment compensation ________________
State and Local Government Regulations
Enforce many rules and _______
Example: driver’s license, building permit
Create order and safety in states and local _________________
Assignment
P. 183, #1-8