© South-Western Educational Publishing Chapter 7 Federal Income Tax Our Tax System Filing Tax Returns.

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© South-Western Educational Publishing Chapter 7 Federal Income Tax Our Tax System Filing Tax Returns

GOALS © South-Western Educational Publishing Lesson 7.1 Our Tax System Discuss the purpose of taxes, different types of taxes, and the history of taxes in the United States. Describe components of the tax system, including the IRS, the power to tax, and paying your fair share.

© South-Western Educational Publishing Why are we TAXED? Government needs $$$$ for: Military Roads Schools Welfare Police, fire

© South-Western Educational Publishing IRS INTERNAL REVENUE SERVICE – in charge of taxes for the United States.

© South-Western Educational Publishing How do we pay our taxes? Income tax – from your paychecks Sales tax - when we buy something Property tax – taxed every year based on the value of your property, the more the property is worth, the more you are taxed Other taxes – examples?

© South-Western Educational Publishing Types of Taxes Progressive taxes – the more you make, the more you are taxed. Example? Regressive taxes – the less you make, the more you are taxed. Example? Proportional taxes – each person is taxed the same RATE, even though the amount will be different for each person. Example?

GOALS © South-Western Educational Publishing Lesson 7.2 Filing Tax Returns Define and discuss the significance of exemptions, dependents, and taxable and nontaxable income on tax returns. Prepare Forms 1040EZ and 1040A.

© South-Western Educational Publishing Filing Status Single person Married person filing a joint return Married person filing a separate return “Head of household” Qualifying widow(er)

© South-Western Educational Publishing What counts as INCOME? Wages, salaries, and tips Interest income Dividend income Unemployment compensation Social security benefits Child support - sometimes Alimony - sometimes

© South-Western Educational Publishing INHERITANCE What is it? You WILL be taxed on an inheritance? 20 – 50% tax!!!!

© South-Western Educational Publishing When filing your taxes Make your income appear to be as LOW as possible. WHY? How do we get a refund? Explain. How do we owe taxes? Explain.

© South-Western Educational Publishing Deductions Itemize – a list of all tax deductions. Examples? Standard deduction – a number given by the IRS for you to use as a tax deduction. Which would you use? Explain.

© South-Western Educational Publishing Preparing to File Who must file? When to file – by April 15. Filing electronically – E-file can be used for state and federal tax returns. Very easy to do online.

© South-Western Educational Publishing Preparing Your Income Tax Return Tax preparation software and online software. Examples? Form 1040EZ and 1040A – EASIEST to fill out Used for FEDERAL RETURN State tax return must also be filed

© South-Western Educational Publishing 1040EZ Most students and younger people can use this form – EASIEST TO FILL OUT!!! You CAN Do it!!!!!