1. MoneyCounts: A Financial Literacy Series
Federal Income Tax for U.S. Individuals
11-A Grange Building
University Park, PA 16802
financialliteracy.psu.edu

2. Description
Taxes are something nobody enjoys thinking about, but it’s important that you educate yourself on important issues related to your taxes This will ensure that you fulfill your legal and fiscal obligations and avoid penalties or other problems, and could help you save some money on your tax bill

3. Learning Outcome
Provide an overview of the federal taxing system for U.S. Individuals
Describe tax withholding and wage statements process
Review relationship between forms W4, W2 for tax purposes
Describe the completion of the Form 1040 using key documents.

4. U.S. Department of Treasury
Internal Revenue Service (IRS) – Collects federal taxes, issues regulations, and enforces tax laws written by the United States Congress

5. Overview of the tax system
Compulsory charges imposed on citizens by local, state, and federal governments
Used to provide public goods and services
Largest amount of taxes a person pays is on his/her income
Pay as you earn or pay as you go
Progressive tax system
Range is in % (10% -37%) applied incrementally to each additional level of taxable income
Overview of the tax system

6. Terminology Filing Status
(single, married, head of household, Widower, etc.,)
Gross Income (GI)
Adjusted gross income (AGI)
Taxable income (TI)
Federal tax withheld (FTW)
Tax credits (TC)
Tax due/tax refund

10. Married/Joint & Widow(er) Married/Separate Head of Household
Tax Reform Individual Tax Rate Schedule
Tax Rate
Single
Married/Joint & Widow(er)
Married/Separate
Head of Household
10%
$1 to $9,525
$1 to $19,050
$1 to $13,600
12%
$9,526 to $38,700
$19,051 to $77,400
$13,601 to $51,800
22%
$38,701 to $82,500
$77,401 to $165,000
$38,701 to $82,000
$51,801 to $82,500
24%
$82,501 to $157,000
$165,001 to $315,000
$82,501 to $157,500
32%
$157,001 to $200,000
$315,001 to $400,000
$157,501 to $200,000
35%
$200,001 to $500,000
$400,001 to $600,000
$200,001 to $300,000
37%
over $500,000
over $600,000
over $300,000

11. Effective Tax Rate – Single
A single person with taxable income of $82,500
$14, – 17% of taxable income
A single person with taxable income of 165,000
$34, – 21% of taxable income

12. Effective Tax Rate – Married
A married couple filing separately with taxable income of $82,500 each
$14, – 17% of taxable income
A married couple filing jointly with taxable income of 165,000
$28, – 17% of taxable income
A married couple filing jointly with taxable income of $82,500 combined
$10, – 12% of taxable income

15. Tax forms Daunting and complicated to most!
Luckily the average American has to deal with a few tax forms
1040EZ (no longer being used in 2018)
1040A (no longer being used in 2018)
1040 (became 1040 simplified form)
Schedules (still apply to 2018)

16. Beginning to End
Employee's Withholding Allowance Certificate. Complete Form W-4 so that your employer can withhold the correct federal income tax from your pay.
Form W-4
Withholding Calculator
Wage and Tax Statement. Employers must file a Form W-2 for each employee from whom Income, social security, or Medicare tax was withheld.
Form W-2

17. Forms 1099 & 1098 Self-employee & independent contractor
Independent – pay own tax liability
Receive 1099
Consumers who pay taxes other than federal receive 1098
Interest received 1098-I
Mortgage interest

18. Changes in tax law for 2018 Changes in tax rates (%)
NO personal exemption
Increase in standard deduction amount
Limitation in itemized deductions categories

19. Statement of income = Form 1099
Form 1099-B
Proceeds from Broker and Barter Exchange Transactions
Form 1099-C
Cancelation of Debt
Form 1099-G
Unemployment Compensation and All Other Government Grants
Form 1099-INT
Interest Income for Schedule B
Form 1099-MISC
Miscellaneous Income
Form 1099-R
Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.

20. Statement of payment = Form1098
Mortgage Interest Statement
Form 1098-T
Tuition and Education Expenses

21. Form 1040
US Individual Income Tax Return Annual income tax return filed by citizens or residents of the United States.
For Tax Year 2018, you will no longer use Form 1040A or Form 1040EZ, but instead will use the redesigned Form Many people will only need to file Form 1040 and no schedules.
Related: Instructions for 1040 Tax Table Schedules for Form 1040
Tax year 2018

22. Schedules attached to Form 1040
Form 1040 (Schedule A)
Proposed Itemized Deductions
Form 1040 (Schedule B)
Proposed Interest and Ordinary Dividends
Form 1040 (Schedule C)
Profit or Loss from Business (Sole Proprietorship)
Form 1040 (Schedule C-EZ)
Proposed Net Profit from Business (Sole Proprietorship)
Form 1040 (Schedule D)
Proposed Capital Gains and Losses
Form 1040 (Schedule E)
Supplemental Income and Loss
Form 1040 (Schedule EIC)
Proposed Earned Income Tax Credit
Form 1040 (Schedule F)
Proposed Profit or Loss from Farming
Form 1040 (Schedule H)
Proposed Household Employment Taxes
Form 1040 (Schedule J)
Income Averaging for Farmers and Fishermen
Form 1040 (Schedule R)
Credit for the Elderly or the Disabled
Form 1040 (Schedule SE)
Self-Employment Tax

23. How to file a tax form? Gross income for Federal Tax
+/- adjustment = Adjusted Gross Income
-Standard deduction/or itemized deduction = Taxable Income
Compare FTW to Tax liability
Either a refund or tax due

24. IRS Assistance Interactive Tax Assistant (ITA)
(ITA) is a tool that provides answers to a number of tax law questions
It can determine if a type of income is taxable
If you're eligible to claim certain credits, and if you can deduct expenses on your tax return
It also provides answers for general questions, such as determining your filing status, if you can claim dependents, if you have to file a tax return, etc.
Frequently Asked Question
Arranged by categories

25. MoneyCounts: A Financial Literacy Series
Comments and questions
11A Grange Building
University Park, PA 16802
financialliteracy.psu.edu