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Taxes are what we pay for civilized society
Oliver Wendell Holmes Jr., 1904
TAXES
Essential Questions

• Are taxes necessary in society?
• How does the government collect taxes from its
  citizens?
• How do taxes impact our lives
• (Tax, income tax, sales tax, property tax, W-2,
  W-4, I-9, 1040 EZ,
• IRS, tax bracket, payroll deductions, tax
  evasion, tax avoidance,
• tax deductible, tax credit, dependent, allowance)

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• Taxes Required charges imposed on citizens by
  local, state,
• federal governments.
• Used to provide public goods and services.
• Sales Tax Tax on sale of items - (regressive)
• Income Tax Tax on earnings - (progressive)
• Property Tax Tax on property (Ex. land, cars)
• Capital Gains Tax Tax on sale of assets (Ex.
  stocks)
• Gift Tax Tax collected on money/property valued
  over 11,000
• Estate Tax Fed. tax on value of someones
  property upon death
• Internal Revenue Service (IRS) Collects federal
  taxes
• Enforces tax laws written by US Congress.

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Government Taxes Where it goes
Surplus to Pay Down the Debt 6
Law Enforcement and General Government 2
Social Security, Medicare and other Retirement 36
Where it comes from
Social Programs 18
National Defense, Veterans and Foreign
Affairs 18
Personal Income Taxes 50
Community Development 10
Interest on the Debt, 10
SS, Med, unemployment 35
Excise, customs, estate, gift, and miscellaneous
Taxes 8
Corporate Income Taxes 7
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Taxes Fund Public Goods and Services
Health Care for Elderly
National Defense
Social Services
State and Local Police
Public Education
Financial Aid
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Sales Tax
A sales tax is a tax, usually paid by the
consumer at the point of purchase for certain
goods and services. of value Dif. states
cities have different tax rates that vary
depending on item Excise Tax applied to select
group of products like gas Alcohol tobacco (sin
tax)
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Property Taxes

• Levied on property, especially real estate
• - If value of property goes up, so does tax
• Can also be levied on cars, boats, RVs
• Fund schools, local services, welfare programs

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Federal State Income Taxes

• Come from earned and unearned income (1099 Form)
• Levied on individuals and corporations
• Support federal state expenses, education
  programs, welfare, national defense, police
  fire, roads
• The more you make, the higher percentage you pay

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2011 Tax Brackets
Tax rate Single filers Married filing jointly or qualifying widow/widower
10 Up to 8,500 Up to 17,000
15 8,501 - 34,500 17,001 - 69,000
25 34,501 - 83,600 69,001 - 139,350
28 83,601 - 174,400 139,351 - 212,300
33 174,401 - 379,150 212,301 - 379,150
35 379,151 or more 379,151 or more
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I have a job, now what????
W-4

• 1. Complete a W-4 Form (Employees Withholding
  Allowance Certificate)
• Used to determine the amount of federal taxes
  withheld from the paycheck
• Claim how many dependents you have
• The more allowances you have, the more of your
  paycheck you may keep
• (allowances or dependents allow you to keep
  more of your money pay less tax)
• Dependent Person who relies on the taxpayer for
  financial support

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Pay-As-You-Go Withholding

• Taxes are paid as income is earned

• Taxes are withheld based on Form W-4 information

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2. Complete an I-9 Form (Employment Eligibility
Verification)

• Employment Eligibility Verification Form
• Used to verify the eligibility of individuals to
  avoid hiring undocumented workers or others who
  are not eligible to work in the United States
• Must provide documentation which establishes
  identity and employment eligibility
• Examples include drivers license, passport,
  Social Security card, and birth certificate

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Ways you may be paid

• Paycheck Check for salary or wages made out to
  an employee
• Employee must deposit/cash check
• Check and paystub given to employee
• 2. Direct Deposit Electronic transfer of an
  employee paycheck by
• an employer
• Automatically puts paycheck into employee
  designated account
• Paystub may be given or accessed electronically
• Secure quick

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Employee Pay
How often you are paid? Pay Period Weekly 52
per year Bi-weekly 26 per year Semi-Monthly 24
per year Monthly 12 per year

• How are people paid?
• Hourly based on hours in period
• Overtime Hours worked beyond the regular work
  week.
• Salary Fixed amount paid each pay period
  regardless of hours worked.
• Commission Amount made based on percentage of
  employee sales.

Standard workday 8 hours Standard work week
40 hours.
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What happens to my money??
About 1/3rd of more of your paycheck will go to
taxes Taxes are immediately paid on income earned
Your Paycheck Percent Multiply by
Federal Income Tax 10-35 .1-.35
State Income Tax 1-6 .01-.06
Social Security Tax 6.20 .062
Medicare Tax 1.45 .0145
TOTAL 18.45- 48.65 .1845-.4865
http//www.bankrate.com/calculators/tax-planning/h
ourly-paycheck-tax-calculator.aspx
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Paycheck Stub
EmployeeBeakens, Joe SSN201-92-4856 SSN201-92-4856 Check 164 Check 164 Check Amount1,102.98
Employee Address293 Michael GroveBillings, MT 59102   Gross Pay Deductions Deductions Current Year-to-date
Employee Address293 Michael GroveBillings, MT 59102    1,353.33 Federal WithholdingState WithholdingSocial Security MedicareMedical401K Federal WithholdingState WithholdingSocial Security MedicareMedical401K 106.0040.8283.9119.620.000.00 503.46117.72636.00244.920.000.00
Employee Address293 Michael GroveBillings, MT 59102     Totals Totals 250.35 1,502.10
Pay Period 6/11/2004-7/11/2004 Pay Period 6/11/2004-7/11/2004 Pay Period 6/11/2004-7/11/2004 Pay Period 6/11/2004-7/11/2004 Pay Period 6/11/2004-7/11/2004 Pay Period 6/11/2004-7/11/2004

• Document included each pay period which outlines
  deductions

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Form W-2

• Shows how much employees earn

• Copy must be attached to tax return

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Tax Avoidance versus Tax Evasion
Tax Avoidance Legal means of decreasing your tax
bill
Tax Evasion Failure to pay legally due taxes
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Tax Breaks
Deductions Reduce income subject to tax
Exemptions Part of income that isnt taxed
Credits Dollar for dollar reduction in tax