8.3 Paying Income taxes - PowerPoint PPT Presentation

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8.3 Paying Income taxes


8.3 Paying Income taxes It s death and taxes here to see you. Taxes wants to come in first. 2 income tax responsibilities: 1)Complete a W-4 when ... – PowerPoint PPT presentation

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Title: 8.3 Paying Income taxes

8.3 Paying Income taxes
Its death and taxes here to see you. Taxes
wants to come in first.
2 income tax responsibilities
  • 1)Complete a W-4 when you start a job.
  • (W-4 B4 start working)
  • 2) File a tax return at least once a year, if
    required and pay any additional tax owed.

Allowances USE W-4
  • Determines how much tax to take out of your
  • Completed at hire.
  • P. 201

Allowances USE W-4
  • Higher allowances- Less taxes taken out of
  • 1 bigger check
  • 0 smaller check

What if you need to change allowances??
  • You can change your W-4 Allowances at any time
    during employment.
  • Ex get married, have a baby, or get divorced.

If a teenager expects to earn less than the
standard deduction amount 6100, and did not have
any tax liability for the prior year, the teen
can write "exempt" on line 7 of the Form W-4 and
no federal income tax will be withheld.
  • You will still have to pay Social Security and
    Medicare. Do not have to file 1040ez. Read
    more Do Teenagers Have to Withhold From
    Paychecks? eHow.com http//www.ehow.com/info_871

Would you rather have more taxes taken out of
paychecks get bigger refund?
  • Or have less taken out of paychecks with less of
    a refund.. possibly have to pay more taxes after
    your return is filed?

Avg. Tax Refund 3000.00
  • Financial advisors argue the point that by
    allowing the government to knowingly collect more
    in tax from you during the year, you are, in
    effect, giving Uncle Sam an interest free loan.

A more wise investment may pay off later
  • For example, reducing your withholding by 3,000
    annually means that for the average taxpayer, you
    will not receive a refund, but you will not owe
    any taxes either.
  • That's an extra 58 per week, or about 250 per
  • Investing that money into a mixture of stocks,
    bonds or precious metals, with an average return
    of 6 percent, would yield an inflation-adjusted
    amount of 70,000 after just ten years. Now
    that's a tidy sum worth taking note of.

  • Anyone supported by tax payers income.
  • Why should you have fewer taxes taken out if you
    have more dependents?

Three Sets Of Twins Born In Different Years Over
New Year's Weekend- 2011/12How does this affect
parents tax return?
How does this affect parents tax return? Baby
born before Dec. 31 at midnight will be claimed
as a dependent for 2011 tax return. Baby born on
Jan 1 will not be claimed until 2012 tax year.
What do you need to file 1040ez tax return?
  • W-2 How many do you have?
  • Do you have a savings account?
  • Then you will also get a FORM 1099.
  • Misc. income reported.
  • Interest from account
  • Prize value
  • Forms must be mailed to you by Jan 31st.

Tax Deduction
  • What do they do?
  • reduces the amount of taxes owed.
  • Ex Make 60,000. Gave 5000 to charity. You
    are taxed on 55,000.
  • 2 main types of deductions-
  • Choose one or the other

Itemized vs. Standard Tax Deductions
  • Which One Should You Take?

2013 Standard Tax Deduction
  • standard tax deduction is easiest.
  • its simply a fixed number set each year used to
    complete taxes.
  • Nearly 2 out of 3 taxpayers take the standard
  • Examples
  • Single   6100
  • Married, Filing Jointly    12,200
  • Head of Household  8,950

2013 Itemized Tax Deductions
  • But if you think you may have tax deductions
    bigger than the standard deduction
  • it may make sense to itemize, even though it
    will require better record keeping and a little
    more work
  • Can not use 1040EZ tax form if itemizing

Itemized Tax deductions
  • Examples include
  • Mortgage interest.
  • Charitable contributions.
  • Property taxes.
  • State and local income taxes.
  • Medical expenses that exceed 7.5 of your
    adjusted gross income.
  • Various miscellaneous expenses that exceed 2 of
    your income such as union dues, tools and
    supplies needed for work, tax preparation fees,
    some legal fees, and many more.

Single person
  • For 2013 You could take Standard Deduction of
  • Or show receipts for Itemized deductions greater
    than 6,100 use longer tax form.
  • Must use one or the other, not both.

Missed deductions can be the most costly.
  • About 48 million of us itemize on our 1040s --
    claiming more than 1 trillion worth of
  • 1,000,000,000,000
  • Another 92 million taxpayers claim about 700
    billion worth using standard deductions
  • 700,000,000,000
  • http//www.kiplinger.com/features/archives/the-mos

Tax Credits bonus
  • Examples
  • Your tax form shows you owe 2,000 in taxes.
  • tax credit of
  • Now owe 1500

Tax Credits bonus
  • Examples
  • 500 tuition credit (ex mater dei)
  • 1000 credit for each dependent child-
  • 16 yrs by dec. 31, 2012.
  • American Opportunity Tax Credit
  • up to 2,500 on the first 4,000 of qualifying
    educational expenses, which include course
    materials as well as tuition.
  • First time homebuyers tax credit
  • Up to 8000 credit extended to 2010 taxes.

Why are tax credits better than tax deductions?
A tax credit is a dollar-for-dollar benefit. The
credit is applied to your final IRS bill, meaning
you get money back or don't have to pay Uncle Sam
as much. Read more http//www.bankrate.com/finan
ixzz2t4K1kNKm Follow us _at_Bankrate on Twitter
Bankrate on Facebook
What is a W-2?
  • When do you get them? By Jan 31.
  • See page 203.
  • INFORMATION ON W-2 should Match your last pay
    stub of the year. Did you check it?

When are tax returns due?April 15th
Why is it important for your parents to get their
taxes completed quickly this year?
Thursday we will complete a 1040EZ tax form.
1040EZ Easy Form
  • Use the 1040EZ if
  • Your taxable income is below 100,000
  • Your filing status is Single or Married Filing
  • You and your spouse if married -- are under
    age 65 and not blind
  • You are not claiming any dependents
  • Your interest income is 1,500 or less
  • Using Standardized Deduction.

When do you get your money?
  • Check the Status Online The fastest and easiest
    way to find out about your current year refund is
    to go to IRS.gov and click the Wheres My
    Refund? link at the IRS.gov home page. To check
    the status online you will need your Social
    Security number, filing status and the exact
    whole dollar amount of your refund shown on your
  • Check the Status By Phone You can check the
    status of your refund by calling the IRS Refund
    Hotline at 8008291954. When you call, you will
    need to provide your Social Security number, your
    filing status and the exact whole dollar amount
    of the refund shown on your return.
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