Taxes Review

Exemption amount for 2017

$4,050

Itemized deduction/Tax deductibles

Appropriate for taxpayers to claim (instead of the standard deduction) when they have several financial responsibilities.

1040EZ

Appropriate tax return return for those taxpayers that have simple/basic life, and financial situations. For example, you can only claim one tax credit and the standard deduction (instead of an itemized deduction).

Tax credits

Benefits/rewards offered by the government to encourage certain activities. They reduce taxpayers' tax bill directly; however, not all of them are "refundable".

Form W-4

Completed by workers and tells employers how much to withhold in income tax.

April 15th (as long as it falls on a "business day")

Deadline for taxpayers to file their federal income tax return, as well as pay their tax bill (if any).

April 20

Deadline to file income tax return to the State of Hawaii.

Standard deduction amount for dependent

Earned income + $350

Allowances

Examples include tax credits, tax exemptions, and tax deductions - all of which help taxpayers avoid tax.

Lien/Levy, Penalty fees with Interest, poor credit history, etc..

Examples of consequences that might result when taxpayers evade paying their income taxes.

Choose which ever will lower their AGI/taxable income more.

How might taxpayers decide if they should claim the standard deduction or itemize their deductions?

True

In addition to income tax, you are also contributing to Social Security and Medicare each pay period.

"Ability to pay"

Income tax is fair according to the government because of this concept.

Refund

Indicates that taxpayers overpaid in income taxes (i.e., too much was withheld from their paycheck throughout the year).

Tax avoidance

Legal ways in which taxpayers can lower their tax bill. Examples include credits, exemptions, and deductions.

Form W-2

Mailed to taxpayers from their employers. It reports how much in federal taxes were withheld for the year.

1099-INT

Mailed to taxpayers from their financial institution when they have "unearned income".

Tax withholding

Process of paying your income tax as you earn your income; it affects your net pay.

Public goods and services

Provided by the government for the benefit of all.

Unearned income

Results when taxpayers' money is working for them and earning interest.

Dependent

Someone that's financially dependent on another the majority of the time. Must be under age 19 or a student until age 24.

General Excise Tax (GET)

Sometimes referred to as the sales tax, businesses in Hawaii are responsible for this tax but pass it to their customers.

Filing status

Standard deduction amount is dependent on this.

Tax table

Taxpayers use this when they're filing their return to determine the income tax based on their AGI and filing status.

False

The IRS only wants to tax taxpayers' earned income (i.e., the income from employers).

Net pay

The money you take home after taxes have been withheld, as well as other deductions (e.g., benefits from employer).

Personal exemption

You and your spouse can/should claim this to lower your taxable income/"AGI".

"AGI"

Your Adjusted Gross Income and the amount of your income that's subject to tax.