8.3 Paying Income taxes

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8.3 Paying Income taxes
Its death and taxes here to see you. Taxes
wants to come in first.
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2 income tax responsibilities

• 1)Complete a W-4 when you start a job.
• (W-4 B4 start working)
• 2) File a tax return at least once a year, if
  required and pay any additional tax owed.

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Allowances USE W-4

• Determines how much tax to take out of your
  paycheck.
• Completed at hire.
• P. 201

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Allowances USE W-4

• Higher allowances- Less taxes taken out of
  paycheck.
• 1 bigger check
• 0 smaller check

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What if you need to change allowances??

• You can change your W-4 Allowances at any time
  during employment.
• Ex get married, have a baby, or get divorced.

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If a teenager expects to earn less than the
standard deduction amount 6100, and did not have
any tax liability for the prior year, the teen
can write "exempt" on line 7 of the Form W-4 and
no federal income tax will be withheld.

• You will still have to pay Social Security and
  Medicare. Do not have to file 1040ez. Read
  more Do Teenagers Have to Withhold From
  Paychecks? eHow.com http//www.ehow.com/info_871
  8274_do-teenagers-withhold-paychecks.htmlixzz2K41
  Rm2xj

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Would you rather have more taxes taken out of
paychecks get bigger refund?

• Or have less taken out of paychecks with less of
  a refund.. possibly have to pay more taxes after
  your return is filed?

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Avg. Tax Refund 3000.00

• Financial advisors argue the point that by
  allowing the government to knowingly collect more
  in tax from you during the year, you are, in
  effect, giving Uncle Sam an interest free loan.

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A more wise investment may pay off later

• For example, reducing your withholding by 3,000
  annually means that for the average taxpayer, you
  will not receive a refund, but you will not owe
  any taxes either.
• That's an extra 58 per week, or about 250 per
  month.
• Investing that money into a mixture of stocks,
  bonds or precious metals, with an average return
  of 6 percent, would yield an inflation-adjusted
  amount of 70,000 after just ten years. Now
  that's a tidy sum worth taking note of.

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Dependent

• Anyone supported by tax payers income.
• Why should you have fewer taxes taken out if you
  have more dependents?

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Three Sets Of Twins Born In Different Years Over
New Year's Weekend- 2011/12How does this affect
parents tax return?
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How does this affect parents tax return? Baby
born before Dec. 31 at midnight will be claimed
as a dependent for 2011 tax return. Baby born on
Jan 1 will not be claimed until 2012 tax year.
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What do you need to file 1040ez tax return?

• W-2 How many do you have?
• Do you have a savings account?
• Then you will also get a FORM 1099.
• Misc. income reported.
• Interest from account
• Prize value
• Forms must be mailed to you by Jan 31st.

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Tax Deduction

• What do they do?
• reduces the amount of taxes owed.
• Ex Make 60,000. Gave 5000 to charity. You
  are taxed on 55,000.
• 2 main types of deductions-
• Choose one or the other

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Itemized vs. Standard Tax Deductions

• Which One Should You Take?

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2013 Standard Tax Deduction

• standard tax deduction is easiest.
• its simply a fixed number set each year used to
  complete taxes.
• Nearly 2 out of 3 taxpayers take the standard
  deduction

• Examples
• Single   6100
• Married, Filing Jointly    12,200
• Head of Household  8,950

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2013 Itemized Tax Deductions

• But if you think you may have tax deductions
  bigger than the standard deduction
• it may make sense to itemize, even though it
  will require better record keeping and a little
  more work
• Can not use 1040EZ tax form if itemizing
  deductions.

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Itemized Tax deductions

• Examples include
• Mortgage interest.
• Charitable contributions.
• Property taxes.
• State and local income taxes.
• Medical expenses that exceed 7.5 of your
  adjusted gross income.
• Various miscellaneous expenses that exceed 2 of
  your income such as union dues, tools and
  supplies needed for work, tax preparation fees,
  some legal fees, and many more.

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Single person

• For 2013 You could take Standard Deduction of
  6,100
• Or show receipts for Itemized deductions greater
  than 6,100 use longer tax form.
• Must use one or the other, not both.

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Missed deductions can be the most costly.

• About 48 million of us itemize on our 1040s --
  claiming more than 1 trillion worth of
  deductions.
• 1,000,000,000,000
• Another 92 million taxpayers claim about 700
  billion worth using standard deductions
• 700,000,000,000
• http//www.kiplinger.com/features/archives/the-mos
  toverlooked-tax-deductions.htmlixzz1XEFxeqJH

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Tax Credits bonus

• Examples
• Your tax form shows you owe 2,000 in taxes.
• tax credit of
  500
• Now owe 1500

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Tax Credits bonus

• Examples
• 500 tuition credit (ex mater dei)
• 1000 credit for each dependent child-
• 16 yrs by dec. 31, 2012.
• American Opportunity Tax Credit
• up to 2,500 on the first 4,000 of qualifying
  educational expenses, which include course
  materials as well as tuition.
• First time homebuyers tax credit
• Up to 8000 credit extended to 2010 taxes.

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Why are tax credits better than tax deductions?
A tax credit is a dollar-for-dollar benefit. The
credit is applied to your final IRS bill, meaning
you get money back or don't have to pay Uncle Sam
as much. Read more http//www.bankrate.com/finan
ce/money-guides/why-tax-credits-are-better-1.aspx
ixzz2t4K1kNKm Follow us _at_Bankrate on Twitter
Bankrate on Facebook
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What is a W-2?

• When do you get them? By Jan 31.
• See page 203.
• INFORMATION ON W-2 should Match your last pay
  stub of the year. Did you check it?

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When are tax returns due?April 15th
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Why is it important for your parents to get their
taxes completed quickly this year?
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Thursday we will complete a 1040EZ tax form.
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1040EZ Easy Form

• Use the 1040EZ if
• Your taxable income is below 100,000
• Your filing status is Single or Married Filing
  Jointly
• You and your spouse if married -- are under
  age 65 and not blind
• You are not claiming any dependents
• Your interest income is 1,500 or less
• Using Standardized Deduction.

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When do you get your money?

• Check the Status Online The fastest and easiest
  way to find out about your current year refund is
  to go to IRS.gov and click the Wheres My
  Refund? link at the IRS.gov home page. To check
  the status online you will need your Social
  Security number, filing status and the exact
  whole dollar amount of your refund shown on your
  return.
• Check the Status By Phone You can check the
  status of your refund by calling the IRS Refund
  Hotline at 8008291954. When you call, you will
  need to provide your Social Security number, your
  filing status and the exact whole dollar amount
  of the refund shown on your return.