Income Taxes Accounting I

Why do we have taxes at all? The United States has a big budget. –We have to pay for things like schools, roads, hospitals, the military, government employees, national parks –The only way to pay for these things is for the government to get money from people and companies. –People and companies pay a percentage of their income to the government. –This is called the income tax. The government taxes our income so it can have enough money to pay for the things we all need.

Who is in Charge? 1.Congress and the President of the United States are responsible for writing and for approving the tax laws. –responsible for the federal budget –how much the government plans to spend on various programs and services. When the government spends more money, it must raise more money through taxes. When the government spends less money, it can afford to lower taxes. 2.The Internal Revenue Service is responsible for enforcing the tax law, for collecting taxes, for processing tax returns, for issuing tax refunds, and for turning over the money collected to the US Treasury. 3.The Treasury, in turn, is responsible for paying various government expenses.

Aspects of the U.S. Tax System Everyone is subject to taxation. The amount of taxes you owe is based on your income. You must pay taxes throughout the year on a pay-as-you-go system. People who earn more income have higher tax rates than those who earn less, this means tax rates get progressively higher the more you earn. You can reduce your taxes by taking advantage of various tax benefits –Deductions

Most Common Tax Deductions 1.Dependents (children) 2.Home Mortgage Interest. 3.Charitable Deductions 4.Income Taxes Paid throughout the year 5.Real Estate Taxes Paid 6.Medical and Dental Expenses 7. Union Dues 8.Education expenses to improve your skill (Graduate school) 9.Daycare Tuition Watch: 4?p=income+taxes&toggle=1&cop=mss&ei=UTF-8&fr=yfp-t-701&vm=r

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Tax Day: April 15 th Tax returns in the United States are reports filed with the IRS containing information used to calculate income tax Tax returns are prepared using forms prescribed by the IRS –Form 1040: U.S. Individual Income Tax ReturnForm 1040 It is a legal obligation to file taxes in the U.S.

What is an Audit by the IRS? Watch! – –Individuals, Corporations, and Small Businesses Owners are Subject to Audits by the IRS

Tax Forms Watch: – Ao&safety_mode=true&persist_safety_mode= 1http:// Ao&safety_mode=true&persist_safety_mode= 1