Chapter 7 Federal Income Tax

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Chapter 7Federal Income Tax

• In the world nothing can be said to be certain
  but death and taxes.
• - Ben Franklin

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Types of Taxes

• The Govt. raises ________ by taxing U.S citizens
  and businesses.
• ______ _______ states that those with high
  incomes should pay more taxes (ability-to-pay
  principle).
• 3 types of taxes

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Progressive Taxes

• Definition
• Example

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Regressive Taxes

• Definition
• Example
• Excise Taxes-

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Proportional Taxes

• Definition
• Example
• Note

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Uses for tax revenues

• Local Level
• Education
• Parks and playgrounds
• Roads
• Police Dept.
• Fire Dept.
• Health Dept.

• National Level
• Salaries for Congress
• National defense
• Highways
• Wildlife refuges
• Welfare
• Foreign aid

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IRS

• I______
• R______
• S______
• Agency of Dept. of the _________
• Main Functions

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The Power to Tax

• Power to levy taxes rests with ____________
• Bills for raising revenue begin in the ________
  ___ _________________
• The ___________________________studies proposals
  and makes recommendations to the full House.
• Bills must pass a vote in both the House and
  Senate and then be signed by the _______ before
  becoming law.

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Paying Your Fair Share

• Tax brackets
• Voluntary compliance
• Taxes are due by _______
• Tax evasion -

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An IRS Audit

• Audit
• Taxpayers can represent themselves or have a
  representative like a lawyer, accountant, or
  agent
• Audits involve confirming __________
  ____________.

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Filing Status

• your tax booklet has complete descriptions of
  each status and how to qualify.

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Exemptions

• Exemptions -
• You are automatically allowed one exemption for
  yourself.
• Exemption amount for 20___ is _____

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Gross Income

• Gross income -

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Other Taxable Income

• Winnings from Gambling
• Bartering Income
• Pensions and Annuities
• Rental Income
• Royalties

• Estate and Trust Income
• Income from the Sale of Property
• Employer-reimbursed Tuition

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Items NOT Taxable

• Items that are not taxable and not part of gross
  income include

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Finding Final Taxable Income

• Gross Income
• - Adjustments
• Adjusted Gross Income
• - Standard Deduction or Itemized Deductions
• - Exemptions
• Taxable Income

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Tax Return Terms

• Adjustments
• Deductions -
• Itemize

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Tax Return Terms

• Standard Deduction
• Exemptions
• Taxable Income -
• Tax Credits

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Preparing to File

• Forms will be either _____, _____, or ____
• If you did not earn enough to file but you had
  taxes withheld, you need to file to get a return.
• You must file by April 15th of the year after you
  earned income.

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Forms

• 1040EZ (Short Form) -
• 1040A (Short Form) -
• 1040 (Long Form) -

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To Begin, You Will Need

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Filing Electronically

• 1040EZ and 1040A forms can be filed at
  www.irs.gov
• You can pay any taxes owed electronically also at
  this site.
• If you are owed a refund, filing electronically
  will enable a quicker processing of you refund
  check.
• If you file electronically make sure you print a
  copy of the return.

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1040EZ Example 1

• Georgina B. Bales (SS 541-33-9892)
• 485 West 11th Ave.
• Ogden, UT 87667
• Georgina is a clerk at a local store. She
  earned 16,500 last year from her job, plus 200
  interest on her savings account. She had 1,016
  withheld in federal income tax last year. She is
  single and no one can claim her as a dependent.
• Form 1040EZ

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1040EZ Example 2

• Brian Smith (SS 354-58-6102)
• 1927 Peach Lane
• Summerville, CO 97153
• Brian is 16 and had a part-time job after
  school. He is single and his parents claim him
  as a dependent. Brian earned 2,675 last year
  from his job. He had no taxable interest. Brian
  had 257 withheld in taxes.
• Form 1040EZ

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1040EZ Example 3

• Use your own information (do not include SS)
• You are single and your parents claim you as a
  dependent. Last year you made 6,542 at your
  part-time job and had 524 withheld for federal
  income tax. You earned 46 interest on your
  savings account.
• Form 1040EZ