Transcript Tax for Teens…

Tax
for
Teens
1
Vocab/Definitions WS
Did You Know?

Average annual income for teens: $3,095.00

40% of teens currently save regularly

Nearly 1/3 all students work 40+ hours per
week in summer

¼ work 35+ hours per week during the school
year

Average teen saves $1000 of summer wages
FYI: Amish pay tax on real estate and personal property and income tax on any
earnings. They do not pay school tax, social security or Medicare tax.
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What’s the Problem?
Teens
don’t understand
how TAX applies to them
Most
forfeit a refund!!!
Is this you???
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I’ve Got A Job!
What’s an I-9
and a W-4?
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Form I-9 – Employment Eligibility
Verification
 Proves
you aren’t an illegal alien
 Penalty if not one on file for each
employee
 Keep 3 years after employee is gone
 Acceptable documents used to prove
citizenship:





Passport
Voter’s registration
School or military ID
Driver’s license
Social security card
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So What Is A W-4?
 New
employees fill out this form
 Tells employers how much federal income tax
to withhold from paycheck
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Filling Out the W-4 Correctly
If don’t fill out correctly:
Owe
money when taxes are
due April 15
Could
be taking out too
much tax from paycheck
Lose
potential interest
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A Few Key Terms You
Need To Know
 WITHHOLDING:

Represents money that an employer
deducts from paycheck to pay all or part of
employee’s taxes
 However,
depending how much make for
the year, you may not have to pay
federal income tax. If this is you, you
would be EXEMPT from paying
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Can you put Exempt on your W4?

You can put “Exempt” if:
1.
2.
3.
4.
Weren’t required to pay federal income tax last year
Don’t expect to this year either (made less than
$6100 {std deduction - base amount of income that is not taxed})
If under 19 or a full-time student (or until 24 yr/full time)
CAN parent(s) claim you as a dependent?


Mind map
DEPENDENT: A person who relies on another taxpayer for
at least half of his or her support (food, shelter, clothing,
education, etc.)
If divorced
 Custodial parent (has child 1 more day than other)
 One makes more money
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Examples:
 If
you live with parents and under 19, you can
be claimed as a dependent regardless of how
much you make.
 While your parents may not choose to claim
you, test is whether they CAN.

If they can claim you and you are under 19, and
expect to make under $6100 in the calendar
year, you will likely NOT have to pay federal
income tax.
 Note:
If you are at least 19 but under 24, parents
can still claim you as a dependent as long as you
are a FULL-TIME Student!
In-Class Am I Exempt WS
Am I Exempt WS
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See pg 347-48 acct text
I don’t qualify for Exempt status –
now what?
 Need
to fill out the personal allowances
worksheet on the W-4 form!
 The
more exemptions (allowances) you claim,
the _____ tax withheld from paycheck

Claim “____” will result in the largest amount of tax
to be withheld
TAX TABLE
Fill out W4 with workbook
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What if I Make a Mistake?
 Claim
exempt and make more than
$6100?
 More
 If
than likely have to owe taxes!
you don’t claim exempt (0 allowances)
 More
than likely break even or
receive a refund!
W4 ws
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Where’s All The
Money I Earned?
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Where’s All The Money I Earned?
 Payroll
Taxes
 Federal
and State
 Collected
from employers and
employees to provide retirement
benefits (social security, Medicare)
 This
amount is paid regardless of
income earned
 Will
NOT get back until retirement
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The Paycheck Stub
 Miscellaneous
 Gross
Information
Income
 Deductions
 May
 No
 Net
get refund on Fed and State
refund on SS or Medicare
Income
W4 qz/Am I Exempt QZ
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What’s This,
More Forms?
W-2s and 1099-INTs
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The W-2
 Must
receive these by January 31st from
your employer
 Summarizes
 How
much you made during the year
 How
much you paid in for taxes
(Earned Income)
 Use
 If
to help fill out tax return
error, see employer to fix
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W-2 continued
W-2
– will have 3 copies
Your
records
Attach
to state tax return
Attach
to federal tax return
Fill out w wb
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1099-INT
Receive
Shows
this form from your bank
interest earned for year
Remember:
Interest is considered
“unearned income” and may have
to pay tax on it!
Fill out w wb
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Am I Required to
File a Tax
Return?
http://www.irs.gov/uac/Do-I-Need-to-File-a-Tax-Return%3F
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Am I Required to File a
Tax Return (as a dependent)?

Due April 15!

Required?
Depends…
*Your income for the year
*If parents can claim you,
you must file if:
1.Your unearned
income was over
$1000
2.Your earned income
was over $6100
OR if…
3.
Filing Requirement Worksheet for Most Dependents
1.
Enter dependent's earned income plus $350
2.
Minimum amount
3.
$1000
Compare lines 1 and 2. Enter larger amt
(Adjusted Earned Income)
4.
Maximum Amount
5.
Compare lines 3 and 4. Enter the smaller
amount
6.
Enter the dependent’s gross total income. If line
6 is more than line 5, the dependent MUST
FILE an income tax return.
$6100.00
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Am I Required to File a Tax Return?
 John
Garcia,
18, earned
$4200 working
at the local
library and was
paid $210 in
interest from his
bank savings
account.
Filing Requirement Worksheet for Most Dependents
1.
Enter dependent's earned income plus $350
2.
Minimum amount
$1000
3.
Compare lines 1 and 2. Enter larger amt (Adjusted
Earned Income)
4.
Maximum Amount
5.
Compare lines 3 and 4. Enter the smaller amount
6.
Enter the dependent’s gross total income. If line 6 is
more than line 5, the dependent MUST FILE an
income tax return.
$6100.00
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http://www.irs.gov/uac/Do-I-Need-to-File-a-Tax-Return%3F
Am I Required to File a Tax Return?
 Jill
Williams, 18, had
two jobs during the
past year. She
worked as a
waitress at La
Fogata, where she
earned $6800 and
as a summer
counselor, where
she earned $2400.
Jill also made $375
in interest.
Filing Requirement Worksheet for Most Dependents
1.
Enter dependent's earned income plus $350
2.
Minimum amount
$1000
3.
Compare lines 1 and 2. Enter larger amt
(Adjusted Earned Income)
4.
Maximum Amount
5.
6.
$6100.00
Compare lines 3 and 4. Enter the smaller
amount
Enter the dependent’s gross total income. If line
6 is more than line 5, the dependent MUST FILE
an income tax return.
Do I have to file return WS
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Should I File a
Tax Return?
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Humm, should I file?
Civic
Duty to File
Voluntary
Compliance
Government
Report
their income
Calculate
File
relies on people to:
tax liability correctly
on time
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To Pay or Not to Pay…
 Why
pay?
 Government
 Ex:
uses money to fund services
School
 Penalty
 Fine
up to $25,000
 Imprisonment
 Or
1-6 Review
up to 1 year
Both!
Do I have to file return QUIZ
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Forms?
1040EZ
1040
– simplest to file
– most lengthy to file
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How Do I File
the 1040EZ?
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How Do I File the 1040EZ?
 Must
meet requirements to use EZ:
 Single
 Claim
no dependents
 Taxable
income < $100,000
 No
income other than wages, salaries,
and tips (shown on W-2)
 Up
to $1500 taxable interest (shown on 1099INT)
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Filling out the 1040EZ
 Terminology:
 Adjusted
 Sum
Gross Income (AGI)
of wages and taxable interest
 Deduction
 Amount
tax payers may subtract from
their AGI before tax is determined (reduction
in income)
 Taxable
 Part
Income
of income you must pay taxes on
 Credit
 Direct
reduction of taxed owed
Fill out 1040EZ wb
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Sending in the Return
 Photocopy
 Mail
 If
the EZ form for record
in W-2 & 1099 INT with return
owe
 payable
to “United States Treasury”
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Don’t Want to Pay? What could
you have done differently?
 If
you don’t choose to pay, IRS will add
5% to what you owe for each month
you don’t pay!
 W-2
 Claimed
“0” rather than exempt so
take taxes out
 Watch
1040 EZ Prob WS
out for scam artists!
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Other Ways for Government to
Collect Money
 Income
tax not only source
 Social
Insurance taxes and contributions
(retirement and unemployment)
 Excise
tax (tax on gas, cigarettes, and alcohol)
 Estate
and gift tax
 Customs
 Other
duties (imports)
miscellaneous receipts
Where Does Your Money GO?
Year 2012 – in billions
of dollars
National Defense
% of debt
689 Billion
19%
Social Security
773
22%
Healthcare (Medicare,
732
21%
220
6%
67,249 million
2%
Medicaid, child health ins program)
Interest on National
Debt
Education
Chap 7 review
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1040 EZ quiz
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What is the 1040 Form?
File 1040 Form?
 File
this form if:

Received dividends or capital gains from an
investment (1099 DIV)
Received tips of $20 or more in any month that
you didn’t report
Box 8 of W-2 shows tips allocated
Earned income from your own business
Won money in lottery or raffle
Received non-employee compensation
Social Security pension

Farm

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

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Filing Status and Exemptions
 Filing
status affects amount tax paid
 Exemptions


$3800 - each exemption may be
subtracted from adjusted gross income
Exemptions help to reduce taxable income
 But
you won’t qualify bc parents can
claim you
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What is Income?
 Income:
“all income from whatever
source derived”
 Earned
Income
 Unearned
Income
 Miscellaneous
Income
Use to report
“other income”
Ex:
• Commissions
• Fringe Benefits
• Laker tickets
• Clothing
• Income from
outside business
• Web page
• Cash prizes won
• Raffle
• Lottery
• Capital Gains
• Interest/Dividends
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Exclusions From Income

Certain economic benefits don’t have to count as income =
exclusions from income

Gifts

Must see Dominant Reason was out of affection, respect, admiration,
charity

Ex: transfer of property

Inheritances

Scholarships


De Minimis Fringe Benefits


May be excluded from income if used to pay tuition/course
related fees
Ex: Store’s photocopier, company coffee, telephone
Ebay winnings (pg 41)
Do pg 42 WB
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Standard & Itemized Deductions
(both help to reduce taxable income)
YOU DECIDE
Standard Deduction: Base amount of income that is not
taxed Income: $6100 (sgl indiv person)
1.
Allowed to deduct this amt from your income before taxes
a.
Itemized Deduction:
2.
a.
b.
c.
d.
e.
f.
g.
State and Local Taxes
Gifts to Charity
Job Expenses – mileage?
Travel
Uniforms
Education – if maintain or improve skills and/or meet
requirements of employer
Other: tools, supplies for job, professional journals, protective
clothing
You will take the larger amount of the two!
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Credit
A
direct reduction of tax owed
 Credit
actually deducted from the
amount of tax you owe (dollar for dollar)
 Child
Care Expenses
 Elderly
or Disabled
 Adoption
 Buying
Expenses
new electric car
 Education
expenses
Payment or Refund?
Payment:
Due
April 15
Refund:
Check
Direct
Deposit
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Chap 8 Review