© south-western educational publishing chapter 7 federal income tax our tax system based on...
TRANSCRIPT
© South-Western Educational Publishing
Chapter 7 Federal Income Tax
Our Tax System Based on voluntary compliance
Filing Tax Returns Must be done by April 15
GOALSGOALS
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Lesson 7.1
Our Tax System
Discuss the purpose of taxes and different types of taxes in the United States.
Describe components of the U.S. tax system.
Why Pay Federal Income Taxes?
Federal level National Defense National Weather Service National Parks Interstate highways Student loans and other aide Relief agencies Regulatory agencies
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Why Pay State and Local Income Taxes?
EducationState welfare programsStreets, roads, and highwaysPolice, fire, and health departmentsLocal recreation and state parks
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© South-Western Educational Publishing
Types of Taxes
Progressive taxes Income Taxes
o Based on the ability to pay
The more you earn the more you pay More of a burden to the wealthy
Types of Taxes
Regressive taxes Sales tax
o Indiana 7%, TN 10%
Burden on poor/lowest wage earnersProportional taxes
Property tax Tax burden is equally distributed
according to property values
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© South-Western Educational Publishing
Components of the Tax SystemThe IRS (Internal Revenue Service)
Primary job is to collect taxes
The power to tax Approved and changed by Congress &
PresidentPaying your fair share Tax brackets: % increases with income
Tax evasion: not paying taxes intentionally
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IRS Audit
Correspondence auditField audit
GOALSGOALS
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Lesson 7.2
Filing Tax Returns
Define tax vocabulary. Prepare tax Forms 1040EZ and
1040A.
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Filing Status
Single personMarried person filing a joint returnMarried person filing a separate
return“Head of household”Qualifying widow(er) with a
dependent child
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Exemptions
Personal exemptionDependent exemption
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Gross Income
Wages, salaries, and tipsInterest incomeDividend incomeUnemployment compensationSocial security benefitsAlimony
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Adjusted Gross Income
Gross income
– Adjustments
Adjusted gross income
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Taxable Income
Gross income
– Adjustments
Adjusted gross income
– Deductions
– Exemptions
Taxable income
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Deductions
ItemizeStandard deduction
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Tax Credits
For college tuitionFor childcare to enable parents to
workFor lower-income wage earners
Taxes and Behavior
Business tax creditsSin Taxes
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Preparing to File
Who must file?When to file?Which form to use?Where to begin?Filing electronically
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Preparing Your Income Tax Return
Tax preparation softwareForm 1040EZForm 1040A
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Form 1040EZ
Step 1: Name, address, and social security number
Step 2: Report incomeStep 3: Compute taxStep 4: Refund or amount owedStep 5: Sign the return
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Form 1040A
Step 1: Name and addressStep 2: Filing statusStep 3: ExemptionsStep 4: Total incomeStep 5: Adjusted gross income
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Form 1040A (continued)
Step 6: Taxable incomeStep 7: Tax, credits, and paymentsStep 8: Refund or amount owedStep 9: Signature