Personal Finance: Module 1 Lesson 4 Tolls Along the Way. Tolls Along the Way • Slide 2. Taxes , after all, are dues that we pay for the privileges of membership in an organized society . Franklin D. Roosevelt, 32 nd President. “. ”.
Personal Finance: Module 1 Lesson 4 Tolls Along the Way
Tolls Along the Way • Slide 2 Taxes, after all, are dues that we pay for the privileges of membership in an organized society. Franklin D. Roosevelt, 32nd President “ ”
Tolls Along the Way • Slide 3 What are Taxes? Taxes are requiredmonetary payments to a government. Governments uses taxes to pay for and to provide services designed to protect and enhance the life of its citizens.
Tolls Along the Way • Slide 4 The History of Taxes Systems for collecting taxes date back to ancient civilization. Taxation of income in the United States began in the 19th century. The Internal Revenue Service (IRS) is the tax collection agency for the U.S. federal government.
Tolls Along the Way • Slide 5 Why do we pay taxes? We pay taxes because the services they provide are necessary and essential for all citizens. The price of these services would be too high for most citizens to provide these services just for their family! Your role as a taxpayer Why Pay Taxes?
Tolls Along the Way • Slide 6 United States Tax Systems Progressive Tax System Based on the individual’s ability to pay Lower income earners pay less tax Income taxis an example of a progressive tax Regressive Tax System Tax percentage is same regardless of income Places a greater tax burden on those with less income Sales tax is an example of a regressive tax
Tolls Along the Way • Slide 7 Who collects taxes? Each branch of government usually collects a separate set of taxes to fund it’s operations. However, taxes collected at one level may also be combined to help fund programs at another! Federal (U.S.) State Local (county & city)
Tolls Along the Way • Slide 8 Taxes Collected by a County or City Property Taxes are paid by people who own property (land, a home, or real estate). Transaction Taxes are paid on goods and services. Sales Tax is charged when a consumer makes a purchase. This tax is a percentage of the total price of the purchase. Excise Tax ischarged on the purchase of specific goods such as motor fuel, cigarettes, or alcohol. This tax is usually included in the price of the item. What is taxed and why Federal/State/Local Taxes
Tolls Along the Way • Slide 9 Tax Terms Withholdings – money that is required by law to be deducted from an employee’s pay Income Tax (Federal & State)* Social Security Tax Medicare Tax Gross Income – employee’s total earnings Net Pay (also called take-home pay) – money remaining after withholdings and other deductions are subtracted *Not all states collect a separate state income tax!
Tolls Along the Way • Slide 10 Federal Income Tax Federal income tax is the largest tax amount deducted or withheld from your paycheck. The amount withheld is based on the employee’s income and number of allowances. Allowancesreduce the amount of federal income tax withheld from your paycheck. Allowancesare claimed when an employee completes the required IRS Form W-4 Employee Withholding Allowance Certificate.
Tolls Along the Way • Slide 11 Form W-4 To view W-4 worksheet: Form W-4 Employee Withholding Allowance Certificate
Tolls Along the Way • Slide 12 State Income Tax Most−but not all−states have an income tax. State income tax is also withheld and reported on W-2. If state requires it—also complete a state income tax return it to your state’s Department of Revenue. State income taxes fund many of the same types of programs and projects as federal taxes!
Tolls Along the Way • Slide 13 Additional Payroll Taxes Social Security Tax provides income for retired workersand their dependents as well as for the disabled and their dependents. Medicare Tax pays for health insurance to offset the cost of medical care for retired persons (and their spouses) who are eligible to receive Social Security benefits.
Tolls Along the Way • Slide 14 Example of a Paycheck Stub
Tolls Along the Way • Slide 15 Links and Activities These links and activities help you understand more about withholdings and other payroll deductions: Payroll Taxes and Federal Income Tax Withholding What Ate My Paycheck? Read and Interpret Pay Stubs(pages 5-7) Understanding My Pay Stub
Tolls Along the Way • Slide 16 Filing Your Income Taxes Form W-2 Wage and Tax Statement Shows taxable income actually received (#1) Shows total amount of income taxes already withheld (#2) Lesson with worksheets Payroll Deductions and Earning Statements
Tolls Along the Way • Slide 17 Filing Your Income Taxes Once you receive your W-2 form, the IRS expects you to: Fill out an income tax return and calculate the correct amount of federal income tax that should be owed (or refunded). File it (electronically or by mail) by the deadline (which usually falls on April 15). Wage and tip income Using Your W-2 to File Your 1040EZ
Tolls Along the Way • Slide 18 Filing Your Income Taxes Tax Return Forms 1040 1040EZ 1040A ? ? Tax basics The Final Step: Filing Taxes
Tolls Along the Way • Slide 19 “ Taxes, after all, are dues that we pay for the privileges of membership in an organized society. Franklin D. Roosevelt, 32nd President ” What do you think he meant by “an organized society”? Without taxes, where would you go to school? What would you do with your trash? Who would build the roads, bridges, and interstates you travel on?
Tolls Along the Way • Slide 20 Financial Education for College Access and Success For this project, the PR/Award Number is V215W100015 and the Department of Education is the funding agency. This information is provided for the reader's convenience. Tennessee and the U.S. Department of Education are not responsible for controlling or guaranteeing the accuracy, relevance, timeliness, or completeness of this information. Further, the inclusion of information or Web site address does not reflect the importance of the organization, nor is it intended to endorse any views expressed or products or services offered.