Taxes

Form W-4 info:

name, address, Social Security number, marital status, and the number of exemptions you are claiming for income tax purposes.

Revenue:

Incoming funds to the government in the form of taxes.

The IRS (Internal Revenue Service): Purpose?

(Part of the Department of Treasury) -To collect income taxes -To enforce tax laws

The power to tax: Who? How?

-Congress -Bills must pass a vote in both the House and the Senate and then be signed by the President before they become law!

Examples of Excised Taxes:

-Gasoline -Cars (must pay EVERY year) -Gambling -Highway usage by trucks

Types of Taxes:

-Progressive taxes -Regressive taxes -Proportional taxes

Audit Choices:

-Represent yourself -Give someone power to take their place -Bring someone (tax prepared, attorney...)

If your personal budget didn't balance, what could you do to balance it?

1) Cut unnecessary spending 2) Increase income (get another job)

If the federal budget doesn't balance, what can be done to help balance it?

1) Cut unnecessary spending/programs 2) Increase income (from of taxes)

How many tax brackets are there? What are their ranges?

7 tax brackets that range from 10% - 39.6%

When do you receive a W-4 and a W2? What is the purpose of each?

A W-4 is filled out when you first apply for a job. The purpose is that a W-4 determines the amount of taxes your employer will withhold from your paycheck. A W-2 is received by January 31st and the purpose is that you need to know your total income and the total amount of taxes withheld in order to file your taxes.

Audit

An examination of their tax returns.

Form W-2 Info:

A summary of the income you earned during the year and all amounts the employer withheld for taxes.

Ability to Pay Method

Accepted principal of tax fairness is that individuals with high incomes should pay more taxes than people with low incomes.

Every year, the IRS calls millions of taxpayers for a what?

An audit.

Exempt Status

Available only to people who will not earn enough in the year to owe any federal income tax.

When do you receive a W-4?

Before starting a job

Failure to pay taxes: Failure to pay can result in what?

Can result in a penalty, interest charges on the taxes owed plus a possible fine.

When do you receive a W-2?

Each of your employers must provide you with a Form W-2 for the previous tax year no later than January 31 of the current year. (between Jan. 1st -31st)

Purpose:

The information determines the amount your employer will withhold from your paycheck for income taxes.

What are some items that are NOT taxed?

Food and clothing! (considered a necessity)

Examples of taxes:

Funds education, public workers, social security, public safety.

Most Income comes from:

Income Taxes

Surplus:

Income collected (through taxes) exceeds the expenditures (the programs taxes fund).

Paying your fair share:Tax brackets-

Income tax ranges

What is the purpose of taxes?

It funds government programs and services!

Types of Audits: Correspondence audit

Letter sent asking to respond to specific questions or to reproduce evidence of deductions or other info on the tax return.

Voluntary Compliance

Means that all citizens are expected to prepare and file tax returns of their own accord without force.

Purpose of W-2 Form:

Need to know total income and total taxes withheld when filing taxes.

Allowances

Reductions in the amount of tax withheld from your paycheck.

Types of Audits: Field audit

Similar to office audit, except visits home or business to verify information.

Excise Tax:

Taxes paid when purchases are made on a specific good, such as gasoline.

Types of Audits: Office audit

Taxpayer sits down with auditor to answer questions and produce records.

Deficit:

The expenditures (the programs taxes fund) exceeds the income collected (through taxes).

Tax evasion:

Willful failure to pay taxes, which is a serious crime punishable by a fine, imprisonment, or both.

Proportional taxes (flat taxes)

are taxes for which the rate stays the same, regardless of income. -Property taxes are proportional (tax rate is based on the value of the home...not income) -Social Security and Medicare Tax

In a free enterprise system such as ours, the government collects what from citizens and businesses?

money from citizens and businesses in the form of taxes.

Sometimes the tax is included in what?

price

Progressive taxes

take a larger share of income as the amount of income grows. Ex. Federal income taxes are progressive.

Regressive taxes

take a smaller share of income as the amount of income grows. Ex. Sales taxes are regressive.

Many people claim 0 if...

they are single, have one job, cannot be claimed as a dependent, and have no children. Technically you could claim up to 2 in this situation.

Our income tax system is based on what?

voluntary compliance.

Claim 0 if...

your parents still claim you as a dependent.