Warm-up Which scam from yesterday are you most concerned about? How can you avoid it? Did you file taxes or fill out the FAFSA this year? What did you think of the process? If you made the rules, how much money do you think someone should make before they have to pay income taxes? Explain your reasoning.

Taxes Unit 7

Forms 1040 (or 1040 EZ) is the main form you will fill out You get a W-2 from your employer to fill out your tax forms W-4 is the form your employer fills out and sends to the IRS Sometimes you’ll get a statement from your bank or student loan company to add to your taxable income

Rate For Unmarried Individuals, Taxable Income Over For Married Individuals Filing Joint Returns, Taxable Income Over For Heads of Households, Taxable Income Over 10% $0 12% $9,700 $19,400 $13,850 22% $39,475 $78,950 $52,850 24% $84,200 $168,400 32% $160,725 $321,450 $160,700 35% $204,100 $408,200 37% $510,300 $612,350

Key Terms AGI - Adjusted gross income, or AGI, is all the income you receive over the course of the year, including wages, interest, dividends and capital gains, minus things such as contributions to a qualified IRA, some business expenses, moving costs and alimony payments. Tax credits - Tax credits are much like credits you get from a store. After you calculate your tax bill, you can use the credit to reduce the amount that you owe to Uncle Sam. A $200 credit, for example, will turn a $1,000 tax bill into only $800. A few credits could even give you a refund you weren’t expecting.

3. Standard deduction - This is a fixed dollar amount that taxpayers can subtract from their income. Most taxpayers use this deduction method, which eliminates the need to itemize actual deductions such as medical expenses, charitable contributions and state and local taxes. 4. Itemized deductions - These are expenses that can be deducted from your AGI to help you reach a smaller income amount upon which you must calculate your tax bill. Itemized deductions include medical expenses, other taxes (state, local and property), mortgage interest, charitable contributions, casualty and theft losses, etc.

5. Progressive taxation - This is the system in which higher tax rates are applied as income levels increase. The U.S. tax system uses progressive taxation with tax brackets starting at 10 percent and rising to 39.6 percent for the wealthiest taxpayers. 6. Taxable income - Taxable income is your overall, or gross, income reduced by all allowable adjustments, deductions and exemptions. It is the final amount of income you use to calculate how much you owe in taxes. 7. Unearned Income - income from investments rather than from work.

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2018 Filing Requirements for Dependents 2018 Filing Requirements for Dependents. You must file a tax return in any of the following circumstances if you're single, if someone else can claim you as a dependent, and if you're not age 65 or older or blind: Your unearned income was more than $1,050. Your earned income was more than $12,000. To be classified as a dependent, a person cannot provide more than half of his own support for the tax year, according to the IRS, but taxable dependents meet additional criteria. -Taxable Dependents - A taxable dependent is a person who is eligible to be claimed as a dependent, but still earns an income. To be classified as a dependent, a person cannot provide more than half of his own support for the tax year, according to the IRS, but taxable dependents meet additional criteria. A taxable dependent cannot earn an income greater than $3,650 unless, at the end of the tax year, he is under 19 years old or under 24 years old and a full-time student.

Fill out a 1040 form!

Audit myths Be very afraid of an audit - The looming myth out there suggests the audit process is something to be desperately feared. The truth is that most people only need to respond to a few IRS questions. Audits are done immediately The IRS abides by a statute of limitations of three years after the due date of the return, says Clegg. For “substantial errors,” the IRS maintains it can go back six years  Filing for certain deductions or credits increases the chance of an audit Many people avoid taking certain credits and deductions—denying themselves tax advantages to which they are entitled—because they believe or have heard that taking them will make them more susceptible to an audit