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PERSONAL INCOME TAXES

PERSONAL INCOME TAXES. The 1040 EZ. DO NOW. Read the Tax Process article In your notebook, design a graphic that represents the income tax process Share with a neighbor, then merge and revise to design one to present to the class. INCOME TAX TERMS .

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PERSONAL INCOME TAXES

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  1. PERSONAL INCOME TAXES The 1040 EZ

  2. DO NOW Read the Tax Process article In your notebook, design a graphic that represents the income tax process Share with a neighbor, then merge and revise to design one to present to the class

  3. INCOME TAX TERMS • Income tax – tax on wages, salaries, and self-employed earnings • IRS – Internal Revenue Service - The federal agency that collects income taxes in the United States. • File a Return - To mail or otherwise transmit to an IRS service center the taxpayer's information, in specified format, about income and tax liability.

  4. INCOME TAX TERMS • Tax Liability- The amount of tax that must be paid • Refund - Owed to taxpayer if their tax payments (withholdings) are greater than total tax • Tax Evasion - Failure to pay, or a deliberate underpayment of taxes.

  5. INCOME TAX TERMS - The Forms • Form W-4- A form that helps an employer determine how much to withhold from an employee's paycheck for federal income tax purposes. An employee completes the form after being hired by an employer. • Form W–2 – Wage and Tax Statement - The form that an employer must send to an employee and the IRS at the end of the year. Reports an employee's annual wages and the amount of taxes withheld from his or her paycheck. • Form 1099 – Int- The form issued by all payers of interest income to investors at year's end. Form 1099-INT breaks down all types of interest income and related expenses. Payers must issue Form 1099-INTs for any party to whom they paid at least $10 of interest during the year. • Form 1040- The standard Internal Revenue Service (IRS) form that individuals use to file their annual income tax returns. Contains sections that require taxpayers to disclose their financial income status for the year in order to ascertain whether additional taxes are owed or whether the taxpayer is due for a tax refund. 1040 forms need to be filed with the IRS by April 15. • Form 1040A- A simplified version of the 1040. No itemizing deductions, no business ownership, taxable income of less than $100,000 • Form 1040EZ - An alternative to the 1040. Taxable income of less than $100,000, interest income of $1,500 or less, no dependents  

  6. The Personal Income Tax Process You receive a W-2 Form from your employer in January You receive a 1099-INT from your bank in January You work, earn income, and have federal withholding tax deducted and withheld You earn interest on your savings accounts Decide if you should complete a 1040EZ or 1040A or 1040 Complete and file your tax return by April 15th If your Federal withholding is more than your tax, you get a refund If your Federal withholding is less than your tax, you make a payment

  7. The W-2 Form • Your W-2 Form • Receive one from each employer for the year • Receive in January • Lists your • Identification information • Employer information • Income • Withholdings

  8. The W-2 Box a: Your social security number Box 2: Federal income tax deducted and withheld Box 3: Wages your Social Security deductions are based on Box 1: Your gross wages for the year Box b: EIN Box 4: The Amt of SS Tax withheld .042 (.062) Box 5: Wages your Medicare deduction is based on Box c: Employer’s name and address Box 6: The amt of Medicare tax withheld .0145 If you earn tips Box e: Your info State and local info for your NJ State Income Taxes

  9. 1099-INT: The Parts Payer’s information Total amount of interest you received from this payer this year Your social security number Payer’s Tax identification information Your info

  10. The W-2: 3 Parts • There are three parts to every W2 form. These parts are actually just copies of your W2, but they are to be sent to different places:Part A which you include with your state tax returnPart B which you include with your federal tax return, andPart C which you should keep for your own recordsIf you are self-employed, you will not get a W2. Instead you need to fill out Schedule C or, if you're a farmer, Schedule F.

  11. The 1040EZ and 1040A • So what do we do with the W-2 and 1099-Int? • We complete our tax return! • Where to get a form: • Library • Tax preparation company • H&R Block, other tax preparation company, Certified Public Accountant • Electronic tax program • Turbotax • Online www.irs.gov

  12. Explore the directions of the 1040EZ • 1040EZ Instructions

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