1. Important Tax Forms W-2 form: reports employee’s annual wages and total amount of taxes withheld from his or her paycheck W-4 form: Determines how much money will be withheld for federal income tax (fill out at the beginning of new job) 1040 form: Standard IRS form individuals use to file income tax returns

2. Principles of Taxation Taxpayer Identification Principles – people who have the same income should be taxed equally Benefit Principles – those who receive the public service should pay for it (tolls, park fees, etc.) Ability-to-Pay Principle – the more you make, the more you should have to pay

3. Principles of Taxation Tax-Rate Principles – percentage that one is charged in tax Proportional Tax: tax rate stays the same, no matter the amount being taxed (ex. Sales tax) Progressive Tax: rate of tax paid increases with the amount being taxed (ex. – income tax) Regressive Tax: tax rate decreases as amount being taxed increases (ex. Gas and cigarette taxes) Direct v. Indirect Tax: direct taxes paid to government, indirect taxes included in the price of a service Pay-as-you-Earn Tax: tax taken out of each paycheck as you earn (ex. – income tax)

4. Types of Taxes Income Tax – federal government’s leading source of income Sales Tax – state government’s leading source of income Property Tax – local government’s leading source of income Excise Tax Social Security Tax Estate and Gift Taxes Customs Duties and Tariffs Business and License Taxes