Taxes. American Tax System Constitutionally, every level has the right to tax your income (10 th...
-
Upload
juliana-mclaughlin -
Category
Documents
-
view
215 -
download
1
Transcript of Taxes. American Tax System Constitutionally, every level has the right to tax your income (10 th...
Taxes
American Tax System
• Constitutionally, every level has the right to tax your income (10th amendment)
• The first income tax was created during the Civil War, but ended shortly after war debts were repaid
• The modern version of income tax in peace time began in 1913
American Tax System
• The American System is a progressive tax system…the more you make, the more they take– The more money a person makes, the larger %
that will be taken out of their paycheck
American Tax System
• The American System is a progressive tax system…the more you make, the more they take– The more money a person makes, the larger %
that will be taken out of their paycheck
• There have been recent proposals for a “flat tax” where everyone pays the same percentage regardless of income level
Year 2010 income brackets and tax ratesMarginal Tax Rate[2]
Single
10% $0 – $8,375
15% $8,376 – $34,000
25% $34,001 – $82,400
28% $82,401 – $171,850
33% $171,851 – $373,650
35% $373,651+
Federal Income Tax Brackets
Microeconomics
• When you get a job, you fill out a W-4– Determines how much $ to withhold to pay
income taxes– If you are an independent contractor, your pay
is not withheld and you are responsible to calculate your own tax burden
– What are dependents?
Microeconomics
• By the end of January, your employer(s) will send you a W-2– This is a statement of how much you were paid,
and what taxes were withheld– This is vital to completing your tax form
• If you have investments…you will get a 1099INT that shows how much interest you made– Interest is income!
Microeconomics
• Determining your tax burden:– You can use a computer program like Turbo
Tax, or use free online applications from the government
– You may also use an accountant or a company like H and R Block
Microeconomics
• What effects your tax burden?
Microeconomics
• What effects your tax burden?– Dependents (kids)– Your income level– Interest paid on loans– Tax deductions
• Education expenses
• Business expenses
• Home upgrades
• Etc.
Microeconomics
• IF you have a lot of deductions…you will want to use a program or seek out a professional
• Most of you can use a 1040EZ form and fill out in under 5 minutes
Microeconomics
• Reminders…– Federal gov’t may owe you money, but you
may owe state and local gov’t– Some communities have reciprocity agreements
that lessen local income taxes– Your parents will probably claim you as a
dependent until you finish college– Taxes are due April 15th every year
Fin
W-2 Form
1099 INT
W-4
1040EZ