Presentation on theme: "Income and Taxes. So… You graduated high school and college… You achieved a degree… You have a solid resume… You rocked on your interview… And."— Presentation transcript:
So… You graduated high school and college… You achieved a degree… You have a solid resume… You rocked on your interview… And now you have a job you LOVE! MONEY– MONEY – MONEY!
Where Does My Money Go? Almost 31% of an individual’s paycheck is deducted Taxes are the largest expense most individuals will have U.S. tax system operates on an ongoing payment system
Purposes of Taxation TAX: a required payment to a local, state, or national government. 1.Fund public goods and services. 2.Influence behavior. 3.Stabilize the economy. 4.Redistribute income.
Kinds of Taxes Income tax: income that you earn is subject to tax. Social Security tax: nation’s retirement program; 6.2% of gross income. Medicare tax: nation’s health care program for elderly and disabled; 1.45% of gross income.
Kinds of Taxes Sales tax: tax paid on the value of goods and services. (revenue for state govt.) Excise taxes: included in the price paid by consumers. (ex: fuel)
Kinds of Taxes Progressive Taxes – Take a larger percentage of income from high income taxpayers Examples are State and Federal taxes Regressive Taxes – As income rises, the taxes remain the same or decrease Examples are Medicare, Social Security, and state sales
Taxes continued Internal Revenue Service (IRS) – Collects federal taxes, issues regulations, and enforces tax laws written by the United States Congress
Federal Revenue, 2002 www.whitehouse.gov Office of Management and Budget 2002
Income Taxes Your employer will withhold, or take out, income tax from every paycheck and send the money to the government.
Who Pays Federal Income Tax? Out of 127,000,000 filers in ’05 Top 1% ($285,424) = 33.71% Top 5% ……………= 53.8% Top 10% …………..= 65.73% Bottom 50% ($28,654) = 3.5% Info from Fall ’06 guest speaker Ken Patzius H & R Block
Withholding The Government takes a portion out of each on of your paychecks
Income Taxes But how much is withheld? Depends on: How much you earn Information you provide on Form W-4
Form W-4 YOU FILL IT OUT B-4 you start! Employees Withholding Allowance Certificate Personal Information Exempt status Allowances: factors that affect the amount of income tax withholding, the more allowances you claim, the less tax your employer will take out. Who should pay more in taxes? Single person making $50,000 Married couple with 4 kids $50,000
Form W-2 “You get you W-2 when you are through” It is supposed to be sent out by Jan 31 st. It is a final tally of what you made and what you paid. Here’s what a W2 looks like. You may have multiple W2s if you work at different places.
It basically shows how much you made and how much you paid!
Form 1040 or 1040EZ The end of the year tally. Did you pay too much or too little? What happens if you paid too much? REFUND! What happens if you didn’t pay enough? PAYMENT!
Tax Time is Here! Must be filed by April 15 th
What Do I Need? Form W-2: Employer will send by Jan 31 st. Shows total earnings for the year and amount of taxes withheld. Form 1099-INT: Bank will send. Shows the earned interest on savings during the year IRS instruction booklets and forms. Form 1040 Form 1040A Form 1040EZ At public libraries or online Personal records
What will I be asked? Status: single, married, divorced, separated Exemptions Dependent: someone who is supported by a taxpayer’s income. Income Deductions: subtracted from income Itemized: amount actually spent (must use Form 1040) Standard: set amount
What will I be asked? Taxable income Tax owed Tax credits Subtracted directly from the amount of tax owed. Final calculations Overpaid: refund! Underpaid: send in $!
What happens if I procrastinate? You must submit your taxes by: Mailing them in Filing them electronically IT MUST BE DONE BY: APRIL 15 TH If not, you must file for an extension.