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What you need to know
Taxes
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WHY ARE WE TAXED?
Number 1 reason: to raise revenueInfluence behaviorBe fair
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Taxes Fund Public Goods and Services
National Defense
Health Care for Elderly
Social Services
Public Education
State and Local Police
Financial Aid
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Property Taxes
•Levied on property, especially real estate
•Can also be levied on boats, RVs, business inventories•Fund schools, local services, welfare programs
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Transaction Taxes
•Levied on economic Transactions (i.e. sales
tax)•Set on percentages or physical quantities
•Support state and local services
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Payroll Taxes
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State DollarsWhere you tax money goes
Social Services
21%
Government Administrative
4%
Education30%
Utility Expenditure
7%
Transportation 7%
Interest on General
Debt4%
Public Safety8% Environment
and Housing7%
General Expenditure
5%
Insurance Trust
Expenditure7%
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The Federal Government Dollar- Where It Comes From
Excise, Customs, Estate, Gift, and Miscellaneous Taxes7%
Personal Income Taxes
43%
Social Security, Social Security, Medicare, and Unemployment and other Retirement Taxes36%
CorporateIncome Taxes
7%Borrowing to
Cover Deficit 6%
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The Federal Government Dollar- Where It Goes
Medicare, andother Retirement
32%
DOD Military19%
Net Interest onthe Debt
7%
Homeland Security
1%
Social Security21%
Other 19%
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Tax Terms
FICA-Federal Insurance Contributions Act. Funds Social Security, Medicaid, etc.
Earned Income--Income that you earn through work or effort
Gross Income--the amount you earn before any deductions
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Tax Terms
Interest Income: Income received from interest earned on a savings account or investments.
Form 1099INT
Taxable Income: the amount of income that can be taxed
Earned income + Interest Income = Taxable income
Tax Liability--The amount of tax that you must pay.
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Tax Terms
Standard Deduction--An amount fixed by the government which taxpayers can deduct from their gross income before their tax liability is determined.
Itemized Deduction--Deductions from your taxable adjusted gross income that is made up of deductions for money spent on certain goods and services throughout the year.
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Tax Terms
Dependent--A person who relies on someone else for support.
More dependents = more taken from each paycheck to meet tax liability
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Tax FormsForm W-2 -- Shows your gross income for one year as
well as the gross amount of federal taxes & social security withheld. Should be mailed to you by Jan. 31.
Form W-4 -- A form that you complete to tell your employer how much money to take out of each paycheck in order to meet your tax liability. Fill out when you start a new job.
Form 1099 INT--the form that indicates the amount of interest earned for the year
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HOW DO WE FILE?
OPTIONS:1. Electronic Filing including telefile, efile using a tax agency or
tax software2. Paper File 3. Let a professional do it all
Which is best for you?
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Tax Rights
Voluntary compliance- Everyone must fileRight to appeal or review any tax decisionsRight to confidentiality and privacyHelp with unresolved tax problemsPay the exact amount-or payment plan
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Factors Affecting Tax Liability
•Deductions: Expenses that can be deducted before determining taxable income
•Tax Credits: Amounts that can be deducted from taxes owed
•Tax Exemptions: A part of income on which no tax is imposed
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WHEN DO WE NEED TO FILE?
Deadline: APRIL 15 is always the day the taxes need to be filed by unless the 15th falls on a Sunday or holiday.
Who needs to file?Any dependent who makes over $6,100.00Any non-dependent who makes over $10,150 Someone who makes under the legal limit, but still
wants to get their money that was withheld
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Filing Options
Electronic Filing:Telefiling-- Only those who receive the package can utilize
this method. No pesky forms to fill out or mailEfile-- Often times this is free through a variety of agencies.
Software can be bought and reused.Security-- Forms stored long-term online in a database. If
you go through one of the approved IRS programs/agencies , there is virtually no risk. The risk is even less if you use a software program that stores the info on your computer
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Filing Options
Paper File--Most confusing, but is always free. Forms available in a variety of places, must be postmarked by April 15th.
Professionally-- Fees are charged. Less chance of mistakes and the potential for a lower tax liability due to their knowledge.
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WHERE CAN WE GO FOR HELP?
Online help at irs.govTax agenciesTeletax hotlineIRS help lineLibrary has tax professionals available on tax day