Sec 12.2 Personal Income Tax

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Sec 12.2 Personal Income Tax

• Objectives
• Recall the four steps that determine tax
  liability
• List the facts needed to find adjusted gross
  income
• Find adjusted gross income
• List possible deductions
• Determine a balance due or a refund from the
  Internal Revenue Service.

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Sec 12.2 Personal Income Tax (cont)

• Objectives
• Prepare a 1040A and a Schedule 1 federal tax form.

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What is income tax?
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• Income Tax
• A tax levied against those individuals that are
  gainfully employed by governments in exchange for
  services such as police and fire protection,
  schools, roads, national defence etc.

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• To prepare your income tax return
• . Find the adjusted gross income (agi) for the
  year.
• . Find the taxable income.
• . Find the tax.
• . Check to see if a refund is due or if more
  money is owed to the government.

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• Adjusted Gross Income
• The result of adding together any wages, tips,
  other compensations, interest from checking or
  savings accounts, less any adjustments to income
  such as alimony payments or payments to an
  Individual Retirement Account (IRAs).

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• Taxable Income (assuming not itemizing)
• AGI - Standard Deduction - Personal Exemptions

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• Standard Deduction Amounts
• 4,400 for single people
• 7,350 for married people filing jointly or
  qualifying widowers
• 3,675 for married people filing separately
• 6,450 for head of household.

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• Personal Exemptions
• an exemption may be taken by the head of a
  household as well as for each of his or her
  dependents.
• For each exemption taken the adjusted gross
  income is reduced by 2,800

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• Tax rates may vary from 15 to 39.6 depending
  on factors such as level of income or filing
  status.
• However, the amount of income tax owed is usually
  computed by means of tables.

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• If a taxpayer itemizes their deductions, what is
  considered a deduction?

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• If a taxpayer itemizes their deductions, what is
  considered a deduction?
• Tax Deduction
• Any expense allowed by the IRS to be
  subtracted from the adjusted gross income.

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• If a taxpayer itemizes their deductions, what is
  considered a deduction?
• Tax Deduction
• Any expense allowed by the IRS to be
  subtracted from the adjusted gross income.
• Please note that to be of benefit, the total of
  all itemized deductions must exceed the
  automatic standard deduction allowed by the
  IRS.

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• Hwk Sec 12.2 The Even