 Liability is an accounting term used in accounting. It means that this is money that is owed to someone.  Tax Liability means the total amount of taxes that are owed.

 4 major categories of taxes › Purchases › Property › Wealth › Earnings

 Every time you buy something. You pay taxes on it. › Excise tax is a tax on a specific goods and services (such as gasoline, air travel and telephone service) collected by federal and state government. › Sales Tax is a tax that is placed on items purchased. It is usually used to help pay for city or town needs can be different from area to area.

 This is something that we discussed in the past.  Taxes in this category are based on the value of land and buildings.  Personal Property Tax – not paid at the same time as income taxes…..

 Estate tax is a federal tax collected on the value of a person’s property at the time of his or her death.  Inheritance tax is a state tax collected on the property left by a person to his or her heir(s) in a will.  Gift Tax is a tax collected on money or property valued at more than $11,000 given by one person to another in a single year. › Gifts of any amount for educational or medical expenses are not subject to gift taxes.

 This is the biggest form of income for the government.  Income Tax is the tax on wages, salaries, and self-employed earnings. › Anytime you make money many different taxes are collected, state, federal, and local taxes are taken from every pay check that you have. › Social Security/Medicare funds are also collected as a tax. These funds finance retirement, disability and life insurance benefits of the federal government's social program.

 Internal Revenue Service › The police department of taxes. › They check to make sure that you and your employer pay your taxes…..

 Income tax return overview Income tax return  Is a form, such as 1040 or 1040 EZ on which a taxpayer reports how much money he or she received from working and other sources and the exact taxes that are owed.

How does the government determine how much you made. What is added together to get the total income. 1. Earned income – the money you receive for working – salary, hourly pay, tips, commissions. 2. Interest Income – the interest that you receive from banks, credit unions, and savings and loan. 3. Dividend income – the cash dividends that you receive from investments. (Capital Gains )

 Tax Exempt › Is another name for Exclusion income or income that is not subject to taxes.  Health insurance  Wackiest items that were thought not to be taxed Wackiest items that were thought not to be taxed  Tax deferred income › Or income that will be taxed at a later date. › Certificate of Deposit

To receive a paycheck, an employee must: › Complete a Form W-4  Employee’s Withholding Allowance Certificate › Complete a Form I-9  Employment Eligibility Verification

Employee’s Withholding Allowance Certificate › Determines the percentage of gross pay which will be withheld for taxes  Allowances › Used to determine the amount of federal taxes withheld from the paycheck › A person may claim a personal allowance if no one else claims the person as a dependent  Dependent – a person who relies on the taxpayer for financial support

Employment Eligibility Verification Form  Used to verify the eligibility of individuals to avoid hiring undocumented workers or others who are not eligible to work in the United States  Must provide documentation which establishes identity and employment eligibility › Examples include driver’s license, passport, Social Security card, and birth certificate

 Contains your tax information for one job in one year  You’ll receive one for each job you worked at during the year Real World Business Chicago, IL Irma Money 2301 South Jackson Chicago, IL , , , IL , D

The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.