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Consumer Taxation

Introduction to Business & Marketing. Consumer Taxation. Learning Objectives. Understand taxes and payroll deductions Identify the major types of consumer taxation. Compute gross and net pay. Complete personal income tax forms. What are taxes.

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Consumer Taxation

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  1. Introduction to Business & Marketing Consumer Taxation

  2. Learning Objectives • Understand taxes and payroll deductions • Identify the major types of consumer taxation. • Compute gross and net pay. • Complete personal income tax forms.

  3. What are taxes • A sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc.

  4. Types of Consumer Taxation

  5. Personal Property Tax • State mandated tax requiring the owner to pay a percentage on the value of their property • Homes • Cars • Recreational Vehicles • Main tax supporting public education, emergency services, and local government

  6. Income Tax • Requires workers to pay a percentage of their earned income • Imposed by the federal government and by most state & local governments • Amount paid depends on your tax bracket

  7. Sales Tax • Consumption tax charged at the point of purchase for certain goods & services • Each state or jurisdiction can set its own sales tax percentage

  8. Sales Tax Examples • Virginia – 5% • Tennessee – 9% • Oregon – 0% • Delaware – 0% • California – 11%

  9. FICA • Federal Insurance Contribution Act • Payroll deductions paid by individuals • Social Security - 12.4% • Medicare – 2.9% • If you are a wage or salary employee your employer pays half • Self employed – you pay all

  10. Understanding Your Paycheck

  11. When You Get Paid… • Gross Pay: wages & salary • Deductions : federal taxes, state taxes, FICA, and other optional deductions • Optional deductions include things like health insurance, retirement, etc. • Net Pay: take-home pay • Calculated by subtracting deductions from gross pay

  12. IN YOUR NOTES • Look over the paystub provided. • Circle & label the employee’s gross pay. • Draw a rectangle around all the deductions for this paycheck. • Circle the employee’s net pay for this paycheck. • How much did the employee pay in taxes? • What percentage of the employee’s gross pay went toward taxes?

  13. Income Forms

  14. Form W-4 • Completed every time you start a new job • Determines how much you will pay in taxes each paycheck • If you claim zero, the highest amount of taxes will be withheld from your paycheck.

  15. 16,680.24 1,728.00 12-2222222 16,680.24 1034.16 Real World Business Chicago, IL 60640 16,680.24 241.92 000-00-000 D 2000.00 Irma Money 2301 South Jackson Chicago, IL 60640 IL 12-2222222 16,680.24 440.40 Form W-2 • Federal tax form issued by employers that states how much an employee was paid in a given year • Used to complete tax return 16,680.24 1,728.00 12-2222222 16,680.24 1034.16 Real World Business Chicago, IL 60640 16,680.24 241.92 D 2000 Irma Money 2301 South Jackson Chicago, IL 60640 IL 12-2222222 16,680.24 440.40

  16. Forms for Filing Taxes

  17. TAX FORMS 1040 EZ 1040A Use this form if… • Income is less than $100,000 • Filing as single or married • Under age of 65 • No dependents Use this form if… • Income is less than $100,000 • Claiming adjustments for student loan interest

  18. MORE TAX FORMS 1040 1099 Use this form if… • Income exceeds or equals $100,000 • Self-employed • Used to report taxable income, such as interest, dividends, stock sales, etc.

  19. Ways to File Your Taxes

  20. Filing Your Tax Return • In the past, you would prepare your taxes and send your complete package in to the Internal Revenue Service (IRS) • Most people now use TurboTax, or another online tax service, to prepare their taxes and then e-file online with the IRS • You can also hire an accountant

  21. Tax Form Activity • http://apps.irs.gov/app/understandingTaxes/student/simulations.jsp • Go to the link provided and complete the simulations listed below • Simulation 1 – Lawrence Red Owl • Simulation 2 – Cicely King • Simulation 3 – Tasha Miller • Simulation 7A – Monica Lindo

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