1. Taxes
Source:

2. for civilized society.”
What does this mean?
“Taxes are what we pay
for civilized society.”
-Oliver Wendell Holmes, Jr

3. Taxes Fund Goods and Services

4. The Power to Tax

5. Where Federal Taxes Come From

6. Where State Taxes Come From

7. Where Federal Taxes Go

8. Where State Taxes Go

9. “John’s” Paystub Gross Pay $2,000
Social Security Tax (6.2% of Gross Pay)
- $124.00
Medicare Tax (1.45% of Gross Pay)
-$29.00
Income Tax (based on information on Form W-4)
-$237.00
State Taxes
-$50.00
Net Pay (also know as “Take-Home Pay” )
$1,560.00
John earns $2,000 gross pay and receives a net paycheck for $1,560
His employer sends $390 ($124 + $29 + $237) to the federal government and $50 to the state for taxes.

10. Form W-4
States your marital status, number of withholding allowances, any additional amount the employee wants to withhold, and exemptions
Taxes are paid each time you get paid

11. Form W-2
Shows how much an employee earned and paid in taxes for the year
Form W-2 is attached to tax return

12. How much was paid in taxes?
Add Box 2, Box 17, and Box 19 together.
$15,851 + $5, $1,092 = $22,287.50

13. Education Tax Credits
American Opportunity Credit – Up to $2,500 credit per eligible student
Lifetime Learning Credit – Up to $2,000 credit per return

14. Financial Record Keeping
Save– Paycheck stubs, bank statements, receipts, completed tax form, tax returns
Store Items in – envelopes, folders, a filing cabinet, or safe

15. Methods of Tax Return Preparation
Electronic
Tax Preparation Software
Manual (paper version)

16. Tax Vocabulary Tax Evasion: Failure to pay legally due taxes
Tax Avoidance: Legal means of decreasing your tax bill.
Medicare Tax: used to provide medical benefits to persons from 65 on
Social Security Tax: provides benefits for retired workers and their dependents

17. Tax Vocabulary
Refund: when tax payments are greater than the total tax, you get that amount back
Amount Due: when the total tax is greater than the total tax payments, you owe money to the IRS.
Deductions: Reduce the amount of income that is taxed
Credits: Dollar for dollar reduction in tax

18. Tax Simulation (Time Permitting)
Click here to practice filling out Form 1040EZ

19. On Your Own (Next Class Period)