1. Taxes Objective: SWBAT evaluate the basics about taxes
Do Now: Why is it important to know about taxes? How does it has to do with financial planning?

2. Why is it important?
The more you know about taxes, the better prepared you will be to create a financial plan that reduces the amount of taxes you will owe!

3. Taxes and financial planning
Find out how the current tax laws and regulations affect you
Make an effort to maintain complete and accurate tax records
Learn how to reduce tax liability
Tax liability: total amount of taxes you owe

4. Types of taxes Taxes on Purchases Taxes on Property Sales Tax
Excise Tax: special sales tax on specific goods and services (e.g. gasoline, air travel)
Taxes on Property
Real Estate Property Tax
Personal Property Tax (e.g. cars, boats, jewelry, furniture)

5. Types of taxes Taxes on Wealth
Estate Tax: a tax collected on the value of a person’s property at the time of his or her death
Inheritance Tax: a tax collected on the property left by a person in his or her will
Gift Tax: a tax collected on money or property valued at more than $14,000 (in the 2015 calendar year) given by one person to another a single year

6. Types of taxes Taxes on Earnings
Social Security Tax: a tax collected by the government to fund the benefits of retirees and those unable to work
Income Tax: a tax on wages, salaries, and self-employed earnings
It is the federal government’s main source of revenue (money)

7. The internal revenue services (IRS)
IRS is the federal agency under the Department of Treasury that collects taxes, or tax revenues and to enforce the nation’s tax laws
Taxes on earnings are collected on a pay-as-you earn basis
The employer withhold, or take out social security and income tax payments from your paycheck and send the money to IRS

8. Understanding income taxes
Where does our income taxes go? Let your paycheck tell you!

9. Learning how to read paystub

10. Learning how to read paystub

11. Steps in calculating your income tax
Determine your adjusted gross income
Identify your taxable income
Calculate how much you owe

12. Income tax terminology
Income Tax Return
A form on which you report how much money you received from working and other sources and the exact taxes, if any, you owe
Compare the amount of tax you owe to the total income tax your employer withheld from your paychecks during the year
Tax withheld > Tax liability = Refund
Tax liability > Tax withheld = Paid for the difference

13. Income tax terminology
Gross income include one, two or three components:
Earned Income
The money you receive for working (include wages/salaries, commissions, bonuses)
Interest Income
The interest you receive from banks, credit unions, and savings & loan associations
Dividend Income
Includes the cash dividends that you receive from investments

14. Income tax terminology
Gross income is also affected by:
Exclusion (Tax-exempt income)
An amount of income that is not included in your gross income (e.g. interest earned through U.S. saving bonds)
Tax-deferred Income
Income that will be taxed at a later date (e.g. retirement IRA)
Adjusted Gross Income
Your gross income after certain reductions (e.g. student loan interest, IRA) have been made; you pay tax on this, not on gross income

15. Income tax terminology
Taxable Income
Your adjusted gross income less any allowable tax deductions and exemptions
Tax Deduction
An expense that you are allowed to subtract from your adjusted gross income to arrive at your taxable income

16. Income tax terminology
Standard Deduction
An amount set by the IRS on which no taxes are paid
Itemized Deduction
A specific expense (e.g. mortgage interest, charitable contributions, medical expenses) that you deduct from your adjusted gross income
Exemption
a deduction from your adjusted gross income for yourself, your spouse, and qualified dependents

17. Income tax terminology
Tax Credit
An amount subtracted directly from the amount of taxes you owe
Allowance
An adjustment to the tax withheld from your paycheck, based on marital status and whether you are supporting other people with your money
Claiming few allowances = more tax money withheld

18. Filing tax returns
Complete the Employee’s Withholding Allowance Certificate (W-4 form) when you begin working at a job
File for tax if you fulfill the age, income, and filing status. If you do not meet filing requirements, you should still file a tax return to obtain a refund!
File by April 15th each year to avoid penalty; if you cannot meet the deadline, file for a four-month extension (an extended deadline for filing an income tax return)

19. Filing tax returns (continued)
Choose the correct tax form and instruction booklets, use copies of your tax return from previous years for reference
Make sure to attach your W-2 form, and interest and dividend forms
W-2 form is the Wage and Tax Statement prepared by the employer listing the employee’s annual earnings, and the amount withheld from his/her paychecks for federal income taxes, Social Security, and any applicable state and local income taxes

20. Filing tax returns (continued)
Don’t forget to keep copies of tax returns and all supporting documents in a safe place for at least 7 years!!!

21. Tax Audit
Tax audit is a detailed examination of your tax return by the IRS
The IRS does periodic audits to determine whether taxpayers are paying all of their required taxes

22. Tax Strategies To legally minimize the amount of tax you have to pay:
Be familiar with deductibles (e.g. mortgages, union dues, some job-related travel and education expenses, business tools, etc.)
Make smart investment decisions
Start retirement plans
Keep updated with tax laws and change your tax strategies if necessary

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