taxes quiz

1040EZ form

You may use this form if you are single or married and claim no dependents. Your taxable income must be less than $50,000

example of proportional tax

property taxes sales tax

country's power to tax income

revenue bills must pass a vote in both the house and senate then be signed by the president before becoming law

national level

salaries for congress national defense wildlife refuges welfare foreign aid

excise tax

(luxury) sales tax imposed on specific goods and services

components of tax system

-IRS -country's power to tax income - each taxpayer's willingness to pay his/her fair shre

different filing statuses

-Single person -Married person filing a joint return -Married person filing a separate return -Head of household -Qualifying widow(er) with a dependent child

how much of social security is taxable

85% of that is taxable if you receive more than $25,000.

dependent

A person who lives with you and receives more than half of his/her living expenses from you. -Each dependent you claim will exclude a certain amount of your income from being taxed. -This amount will change according to the cost of living

gross income

All the taxable income you receive -including wages, tips, salaries, interest, dividends, unemployment, alimony, workers compensation, etc.

exemptions

An amount you may subtract from your income for each person who depends on your income to live. -You would not have to pay tax on this amount Exemptions reduce your total tax

1040EZ Step 3

Compute tax -Enter your federal tax that was already withheld -To see what you owe, find what tax bracket you belong to and do the math.

fiel audit

IRS agent visits taxpayer to verify info or ask specific questions

correspondence audit

IRS send a letter asking taxpayer to respond to specific questions of produce evidence

alimony

Money paid to support a former spouse. -taxable for the person receiving it -deductible for the person paying it

1040EZ Step 1

Name, address, and social security number If you completed taxes before, sometimes the IRS will supply a printed label with this information already attached In this section you can donate to the presidential campaign for $3

1040EZ Step 4

Refund or Amount Owed -If what you paid is more than what you owe then you receive a refund. -If not, you send a payment to the IRS

1040EZ Step 2

Report Income -Enter your total wages, salaries, tips. Interest earned, unemployment, etc. -This is where you state if you are a dependent on someone else's taxes --If so, you will not receive the standard deductions. If not you may enter standard deductions and personal exemptions

form 1040A

Same requirements as 1040EZ HOWEVER you may claim dependents and use deductions such as child care and IRA accounts

1040EZ Step 5

Sign and Return -Sign and date your tax return -Attach your W-2 and mail to your regional IRS office

1040A steps

Step 1: Name and Address Step 2: Filing Status Step 3: Exemptions -Claim your spouse if filing jointly and all dependents Step 4: Total Income Step 5: Adjusted Gross Income Step 6: Taxable Income Step 7: Tax, Credits, and Payments Step 8: Refund or amount owed Step 9: Signing

preparing to file

You must file if you have earned over a certain amount -In recent years it has been if you are under 65 and have earned more than $7,800 -You may still need to file if you make under that amount if you meet other criteria -If taxes were withheld from you and you do not make enough to be taxed, you may file for a tax refund

filing date

You must file no later than April 15. -If that falls on a holiday or weekend, taxes are due the following weekday -Filing late will result in penalties and interest charges -Always save all W-2 forms and receipts to prove tax accuracy if audited.

what to do if audited

You'll have 30 days to respond You can have a professional on site Know your rights Be calm and collected You do have the right to appeal the ruling

ability to pay principle

a principle of tax that individuals with high incomes should pay more taxes than people with low incomes

standard deductions

a stated amount that you may subtract from adjusted gross income instead of itemizing your deductions

IRS

agency of department of treasury main goals of IRS -collect income taxes -enforce tax laws

voluntary compliance

all citizens are expected to prepare and file income tax returns taxes are due april 15 every yr

tax credit

amount subtracted directly from the tax owed.

how to keep from getting audited

check your math to be sure everything adds up Complete your forms neatly Keep good records File before April 15th

gross income not taxed includes

child support gifts inheritance(if under a certain amount) life insurance veterans' benefits

examples of dependents

children spouse elderly parent disabled relative

The government allows tax credit for

college tuition, childcare, green movement, medical expenses, etc

what taxes provide at a local level

education parks roads police, fire and health departments playground

audit

examination of you tax returns by the IRS

deductions

expenses the law allows you to subtract from your adjusted gross income to determine your taxable income. -To get the tax benefit from your deductions you must itemize them.

example of progressive tax

federal income tax low income earners may pay 15% income tax while high income earners may pay 28%

proportional tax

flat tax taxes for which the rate stays the same, regardless of income

tax brackets

income ranges to which tax rates apply currently have 7 tax brackets ranging from 10% to 39.6%

largest source of government revenue

income tax

what can congress do

increase taxes when needed to bring in more money to balance the budget

who does responsibility to file tax return and pay taxes rest with

individual

failure to pay taxes

interest charges fines imprisonment

what does interest income include

interest from banks, savings, and savings bonds

itemize

list allowable expenses on your tax return

graduated system

meaning tax rates increase as taxable income increases

revenue

money collected by the government from citizens and business in the form of taxes

child support

money paid to a former spouse for support of dependent children. -Not taxable for the person receiving it, nor deductible for the person paying it.

what does dividend income include

money, stock, or other property that corporations pay to stockholders in return for their investment. -Max off 15% tax rate

example of regressive tax

social security caps your tax at a certain perfect so even if you make more money it wont impact you as much

other taxes providing government revenue

social security tax unemployment insurance inheritance and estate tax import duties property tax

"sin" tax

tax imposed on items that are not illegal but highly discouraged

progressive tax

taxes that take a larger share of income as the amount of income grows

regressive taxes

taxes that take a smaller share of income as the amount of income grows

taxable income

the income on which you will pay tax

adjusted gross income

the result of adjustments subtracted from gross income -Reduces your income that is subject to tax

what must waiters and waitresses claim

tips on the job so it is included in their W-2. -Tips are taxable

tax evasion

willful failure to pay taxes

is it required by law to enter unemployment as income on you tax return

yes