Transcript Planning Your Tax Strategy

Planning Your
Tax Strategy
Personal Financial Planning
Name_____________________
Taxes and You
Why are taxes so important?
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Taxes are an everyday expense of life that allow
your local, state, and federal government to
provide important services.
Taxes pay the bills for those services such as:
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Medicare
Medicaid
Military
National debt
Police and fire protection
Public schools
Road maintenance
Parks, libraries, safety inspection of foods/drugs
Types of Taxes
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You pay some type of tax every time you get
a paycheck, buy a pair of shoes, or fill up your
tank.
Taxes on Purchases
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Sales Tax – added to price of product by
state/local governments
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Some states do not tax food and medicine
Excise Tax – tax on specific goods/services
collected by federal/state government
Gasoline
 Air travel
 Telephone service
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Taxes on Wealth
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Estate Tax – federal tax collected on the
value of a person’s property at the time of
their death
Inheritance Tax – state tax collected on the
property left by a person in their will
Gift Tax – money or property valued at more
than $11,000 given by one person to another
in a single year.
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Educational and medical expenses are not
subject to gift tax.
Types of Taxes
 Taxes
tax
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on Property - real estate property
Major source of income for local
governments
 Covers
cost of local schools
 City expenses
Taxes on Earnings
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Income Tax – tax on wages, salaries, and selfemployed earnings.
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Federal government main source of revenue.
Social Security funds are also collected as a tax.
The Internal Revenue Service (IRS)
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Primary purpose is to collect federal income
taxes and to enforce the nation’s tax laws.
Complete your federal income tax return, you
determine if you have paid too much or too
little income tax.
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At that time you either pay more or receive a
refund from the IRS.
A Form W-2
Provides much of the information that you need to file your yearly federal income tax
Understanding Income Taxes
 Income
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tax return
1040 or 1040EZ
Reports how much money you received
from work and other sources and the exact
taxes that are owed
Are you entitled to a refund or do you owe
more?
Form 1040
Gross and Adjusted Gross
Income
 Gross
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Income
Earned Income
Interest Income
Dividend Income
 Adjusted
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Gross Income
Gross income after calculating reductions
 Contributions
to a Retirement saving plan
(IRA)
 Student loan interest
Your Taxable Income
 Adjusted
gross income less any allowable
tax deductions
 Your income tax is calculated based on
your taxable income
Tax Deductions
 An
expense that you can subtract from
your adjusted gross income
 Standard Deduction – amount of money
set by gov’t that isn’t taxed (2014)
Filing Status
Standard Deduction
Single
$6,200
Married Filing Jointly
$12,400
Married Filing Separately
$6,200
Head of Household
$9,100
Itemized Deductions
(further reduces tax liability)
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Medical and Dental Expenses
Taxes
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Interest
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State and Local Taxes
Real Estate Property Tax
Home Mortgage interest
Home Equity Loan interest
Contributions
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Cash and property to qualified charities
*Use standard deduction unless itemized is more*
Exemptions
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Deduction from adjusted gross income
Dependent – someone you support
financially, such as a child.
Tax exemption amounts:
2014 $3,950
2015 $4,000
Tax Credit – subtracted directly off your taxes
you owe
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EIC – Earned Income Credit – Low income
workers
Making Tax Payments
 Payroll
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Withholding
W-4 Form
2014 Tax Year Brackets
(Filing Status)
Tax Rate
Single
Married/Joint
& Widow(er)
Married/Separate
Head of Household
10%
$1 - $9,075
$1 - $18,150
$1 - $9,075
$1 - $12,950
15%
$9,076-$36,900
$18,151 to $73,800
$9,076 to $36,900
$12,951 to $49,400
25%
$36,901 to $89,350
$73,801 to $148,850
$36,901 to $74,425
$49,401 to $127,550
28%
$89,351 to $186,350
$148,851 to
$226,850
$74,426 to $113,425
$127,551 to
$206,600
33%
$186,351 to
$405,100
$226,851 to
$405,100
$113,426 to
$202,550
$206,601 to
$405,100
35%
$405,101 to
$406,750
$405,101 to
$457,600
$202,551 to
$228,800
$405,101 to
$432,200
39.6%
over $406,750
over $457,600
over $228,800
over $432,200
The W-2 Form
The Federal Income Tax Return
 Deadline
– April 15th
Completing the Federal
Income Tax Return
 1040EZ,
1040A, 1040 ???
 Gathering Information and Documents
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Tax forms and instruction booklets
Copies of your tax returns
Your W-2 Form
Interest and Dividend forms
Save copies and supporting documents for
at least six (6) years
Completing State Income Tax
Returns
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States with no income tax:
Alaska
Florida
Nevada
South Dakota
Texas
Washington
Wyoming
States with nearly no income tax:
Tennessee
New Hampshire
NJ State Income Tax Rates
Tax Withholding Table
Single or Married/Civil Union Couple- Filing Separately
(Rate Table A)
If the Amount of
Taxable Income Is:
Over:
$
0
The Amount of New Jersey
Tax Withholding Should Be:
But Not
Over:
$ 20,000
$
0
plus 1.5%
Of Excess
Over:
$
0
20,000
35,000
300
plus 2.0%
20,000
35,000
40,000
600
plus 3.9%
35,000
40,000
75,000
795
plus 6.1%
40,000
75,000
>500,000<
2,930
plus 7.0%
75,000
>500,000
and over
32,680
plus 9.9%
500,000<
Tax Assistance and Strategies
 Tax
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Assistance
IRS Website
Books
Software
 TurboTax
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Professionals
 H&R
 Tax
Block
Audit
The most common payroll tax
withholdings are:
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FICA -
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MEDICARE FICA -
Federal Insurance Contribution Act (Social
Security)
Part A
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FED W/H -
Federal Withholding Tax
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NJ W/H -
NJ Withholding Tax
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NJ TDI -
NJ Temporary Disability Insurance
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NJ UIC -
NJ Unemployment Insurance Compensation
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NJ HCS Insurance)
NJ Health Care Subsidy (Portion of Disability
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NJ WFD -
NJ Work Force Development (Portion of
Unemployment Insurance)
Paystub:
 http://www.jerseystubs.com/