taxes. the federal government dollar – where it comes from
TRANSCRIPT
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TaxesTaxes
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The Federal Government The Federal Government Dollar – Where it Comes Dollar – Where it Comes FromFrom
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The Federal Government The Federal Government Dollar – Where it GoesDollar – Where it Goes
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Tax TermsTax TermsTax Evasion: Failure to pay
legally due taxesTax Avoidance: Legal means of
decreasing your tax billYour rights as a taxpayer:
◦Information on taxpayer returns is private
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Fill Out a W-4 for Fill Out a W-4 for Lawrence:Lawrence:
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Allowances and Allowances and WithholdingWithholdingWithholding allowances: 0 1
2 Amount of tax withheld: $61 $52
$44 Can you describe the relationship
between the number of allowances claimed on Form W-4 and the amount of tax withheld?
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Calculating PayCalculating Pay• Gross pay is the amount the
employee earns• Net pay, or take-home pay, is the
amount the employee receives after deductions
• The difference between gross pay and net pay is:–Social Security taxes–Medicare taxes– Income tax withheld–Other amounts withheld
• Employers send the withheld taxes to the taxing authorities
6.2%
1.45%
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Social Security TaxSocial Security TaxAlso called the FICA (Federal
Insurance Contributions Act) taxProvides the following benefits
for employees and their dependents:◦retirement benefits◦benefits for the dependents of
retired workers◦benefits for the disabled and their
dependents
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Medicare TaxMedicare TaxAlso called the FICA (Federal
Insurance Contributions Act) taxUsed to provide medical benefits
for certain individuals when they reach age 65.
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Comprehensive ExampleComprehensive Example
• Angela Viviano earns $2,000 a month as a physical therapist's assistant. Her employer withholds $50 for her retirement account. Angela's net pay is calculated as follows:–Gross pay $2,000.00 – Social Security tax (6.2 percent of gross pay): –Medicare tax (1.45 percent of gross pay):– Income tax (per Form W-4): -$220.00 – Retirement: -$50.00 –Net pay:
• Angela earns $2,000 and receives• Her employer sends to the
federal government and $50 to the retirement fund.
-$124.00
-$29.00
$1,577.00 $1,577.00
$373 ($124 + $29 + $220)
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ExemptionsExemptions• There are two types of exemptions: • personal exemptions• dependency exemptions
• Each exemption reduces the income that is subject to tax
• The exemption amount changes every year• In 2009, the exemption amount was
$3,650• A taxpayer cannot claim an exemption
for a person who can be claimed as a dependent on another tax return
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ExemptionsExemptions• Personal Exemptions• Personal exemptions can be claimed
for the taxpayer and spouse. • Each personal exemption reduces
the income that is subject to tax by the exemption amount.
• Dependency Exemptions• Children
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Standard & Itemized Standard & Itemized DeductionsDeductions• The standard deduction is based
on filing status• 2009 Standard Deduction Single
$5,700 • Head of household $8,350 • Married filing a joint return $11,400
• Some taxpayers will itemize deductions.• When itemized deductions are
greater than the standard deduction