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Chapter 7 Federal Income Tax

Chapter 7 Federal Income Tax. “In the world nothing can be said to be certain but death and taxes.” - Ben Franklin. Types of Taxes. The Govt. raises ________ by taxing U.S citizens and businesses.

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Chapter 7 Federal Income Tax

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  1. Chapter 7Federal Income Tax “In the world nothing can be said to be certain but death and taxes.” - Ben Franklin

  2. Types of Taxes • The Govt. raises ________ by taxing U.S citizens and businesses. • ______ _______ states that those with high incomes should pay more taxes (ability-to-pay principle). • 3 types of taxes

  3. Progressive Taxes • Definition: • Example:

  4. Regressive Taxes • Definition: • Example: • Excise Taxes-

  5. Proportional Taxes • Definition: • Example: • Note:

  6. Local Level Education Parks and playgrounds Roads Police Dept. Fire Dept. Health Dept. National Level Salaries for Congress National defense Highways Wildlife refuges Welfare Foreign aid Uses for tax revenues

  7. IRS • I______ • R______ • S______ • Agency of Dept. of the _________ • Main Functions:

  8. The Power to Tax • Power to levy taxes rests with ____________ • Bills for raising revenue begin in the ________ ___ _________________ • The ___________________________studies proposals and makes recommendations to the full House. • Bills must pass a vote in both the House and Senate and then be signed by the _______ before becoming law.

  9. Paying Your Fair Share • Tax brackets = • Voluntary compliance – • Taxes are due by _______ • Tax evasion -

  10. An IRS Audit • Audit – • Taxpayers can represent themselves or have a representative like a lawyer, accountant, or agent • Audits involve confirming __________ ____________.

  11. Filing Status • your tax booklet has complete descriptions of each status and how to qualify.

  12. Exemptions • Exemptions- • You are automatically allowed one exemption for yourself. • Exemption amount for 20___ is $_____

  13. Gross Income • Gross income -

  14. Winnings from Gambling Bartering Income Pensions and Annuities Rental Income Royalties Estate and Trust Income Income from the Sale of Property Employer-reimbursed Tuition Other Taxable Income

  15. Items NOT Taxable • Items that are not taxable and not part of gross income include:

  16. Finding Final Taxable Income Gross Income - Adjustments Adjusted Gross Income - Standard Deduction or Itemized Deductions - Exemptions Taxable Income

  17. Tax Return Terms • Adjustments – • Deductions - • Itemize –

  18. Tax Return Terms • Standard Deduction – • Exemptions– • Taxable Income - • Tax Credits –

  19. Preparing to File • Forms will be either _____, _____, or ____ • If you did not earn enough to file but you had taxes withheld, you need to file to get a return. • You must file by April 15th of the year after you earned income.

  20. Forms • 1040EZ (Short Form) - • 1040A (Short Form) - • 1040 (Long Form) -

  21. To Begin, You Will Need

  22. Filing Electronically • 1040EZ and 1040A forms can be filed at www.irs.gov • You can pay any taxes owed electronically also at this site. • If you are owed a refund, filing electronically will enable a quicker processing of you refund check. • If you file electronically make sure you print a copy of the return.

  23. 1040EZ Example #1 Georgina B. Bales (SS# 541-33-9892) 485 West 11th Ave. Ogden, UT 87667 Georgina is a clerk at a local store. She earned $16,500 last year from her job, plus $200 interest on her savings account. She had $1,016 withheld in federal income tax last year. She is single and no one can claim her as a dependent. Form 1040EZ

  24. 1040EZ Example #2 Brian Smith (SS# 354-58-6102) 1927 Peach Lane Summerville, CO 97153 Brian is 16 and had a part-time job after school. He is single and his parents claim him as a dependent. Brian earned $2,675 last year from his job. He had no taxable interest. Brian had $257 withheld in taxes. Form 1040EZ

  25. 1040EZ Example #3 Use your own information (do not include SS#) You are single and your parents claim you as a dependent. Last year you made $6,542 at your part-time job and had $524 withheld for federal income tax. You earned $46 interest on your savings account. • Form 1040EZ

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