Transcript Tax for Teens… - Mrs. Ciecko's Class

Vocab/Definitions WS
1
What’s the Problem?
 Teens don’t understand how
TAX applies to them
 Most forfeit a refund!!!
Is this you???
2
I’ve Got A Job!
What’s an I-9
and a W-4?
3
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
4
So What Is A W-4?
 New employees fill out this form
 Tells employers how much federal income tax to
withhold from paycheck
5
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
6
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 rest of
the calendar year, you may not have to pay federal
income tax. If this is you, you would be EXEMPT from
paying
7
Are you Exempt?

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 $5800)
If under 19 or a full-time student (or until 24 yr/full time)
If have to pay, will depend on if parents CAN claim you
as a dependent


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.
 If they can claim you and you are under 19, and
expect to make under $5800 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 FULLTIME Student!
In-Class Am I Exempt WS
Am I Exempt WS
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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
less tax withheld from paycheck
 Claim “0” will result in the largest amount of tax to be
withheld
Do: Pg. 6 then Fill out W4 WS
10
What if I Make a Mistake?
 Claim exempt and make more than
$5800?
 More than likely have to owe taxes!
 If you don’t claim exempt (0 allowances)
 More than likely break even or receive
a refund!
11
What? More Forms?
 W-2 – will have 3 copies
 Your records
 Attach to state tax return
 Attach to federal tax return
 1099-INT
12
The W-2
 Must receive these by January 31st from your
employer
 Summarizes
 How much you made during the year
(Earned Income)
 How much you paid in for taxes
 Use to help fill out tax return
 If error, see employer to fix
13
1099-INT
 Receive this form from your bank
 Shows interest earned for year
 Remember: Interest is considered
“unearned income” and may have to pay
tax on it!
15
W-2 and 1099-INT will help
you to determine whether
you are required to, or
should, file a federal tax
return!
17
Am I Required
to File a Tax
Return?
18
Am I Required to File a
Tax Return (as a dependent)?

Due April 15!

Required?
Depends…
*Your income for the year
3.
Filing Requirement Worksheet for Most Dependents
1.
Calculate Gross Income:
(earned income + unearned income)
2.
Enter dependent's earned income plus $300
*If parents can claim you,
you must file if:
1.Your unearned income
was over $950
2.Your earned income was
over $5800
3.
Minimum amount
4.
Compare lines 2 and 3. Enter larger amt
(Adjusted Earned Income)
5.
IS: Gross Income > Adjusted Earned Income?
MUST file
6.
IS: Gross Income < Adjusted Earned Income?
DOES NOT have to file
$950
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.
Calculate Gross Income:
(earned income + unearned income)
2.
Enter dependent's earned income plus $300
3.
Minimum amount
4.
Compare lines 2 and 3. Enter larger amt
(Adjusted Earned Income)
5.
6.
IS: Gross Income > Adjusted Earned Income?
MUST file
IS: Gross Income < Adjusted Earned Income?
DOES NOT have to file
$950
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.
Calculate Gross Income:
(earned income + unearned income)
2.
Enter dependent's earned income plus $300
3.
Minimum amount
$950
4.
Compare lines 2 and 3. Enter larger amt
(Adjusted Earned Income)
5.
6.
IS: Gross Income > Adjusted Earned Income?
MUST file
IS: Gross Income < Adjusted Earned Income?
DOES NOT have to file
Do I have to file return WS
Should I File a Tax Return?
 Civic Duty to File
 Voluntary Compliance
 Government relies on people to:

Report their income

Calculate tax liability correctly

File on time
22
To Pay or Not to Pay…
 Why pay?
 Government uses money to fund services

Ex: School
 Penalty
 Fine up to $25,000
 Imprisonment up to 1 year
 Or Both!
1-6 Review
23
Forms?
 There are 3 forms you can choose from
to file
 1040EZ – simplest to file
 1040A
 1040 – most lengthy to file
24
How Do I File the
1040EZ?
25
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 Gross Income (AGI)

Sum of wages and taxable interest
 Deduction

Amount tax payers may subtract from their AGI
before tax is determined (reduction in income)
 Taxable Income
 Part of income you must pay taxes on
 Credit
 Direct reduction of taxed owed
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Sending in the Return
 Photocopy the EZ form for record
 Mail in W-2 & 1099 INT with return
 Check if 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 out for scam artists!
1040 EZ Prob WS
29
Where Does Your Money GO?
Year 2011 – in billions
of dollars
National Defense
% of debt
718 Billion
20%
Social Security
731
20%
Healthcare (Medicare,
769
13%
Interest on National
Debt
230
6%
Education
72
2%
Medicade, child health ins program)
Chap 7 review
1040 EZ quiz
30
Payment or Refund?
Payment:
 Due April 15
Refund:
 Check
 Direct Deposit
1040 Prob WS
Chap 8 Review
31
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