Transcript Itemized vs. Standard Tax Deduction

8.3 Paying Income Taxes
 2 income tax responsibilities:
 Complete a w-4 when you start a job.
 File a tax return at least once a year and pay
any additional tax owed.
Allowances: USE W-4
(w-4 before you start work.)
 Purpose: Determines
how much tax to take
out of your paycheck.
 Completed at hire.
 Higher allowancesLess taxes taken out
of paycheck.
When can you change # of
allowances on w-4?
 Anytime
 Ex: when you have a baby or get
married.
Dependent:
 Anyone supported by tax payers income.
 Why should you have fewer taxes taken
out if you have more dependents?
Three Sets Of Twins Born In
Different Years Over New
Year's Weekend
Would you like no federal
taxes taken out of your
check?
 The Standard Deduction for individual is $6100
for 2013.
 If you expect to earn less than that amount and did
not have any tax liability in 2012, you can write
“EXEMPT” on line 7 on your W-4.
 No FEDERAL taxes will be taken our of your check.
You will not have to file a 1040EZ tax return. State
taxes and FICA will still be deducted from you
check.
WHICH IS BETTER?
 Big refund?
 Bigger paychecks throughout the year?
Average tax refund $3000.
 "All a tax refund is, is the government
saying to you, 'You've overpaid and
here's your change,' " explains Charles
Enis, an accounting professor at Penn
State University.
 Uncle Sam is getting an interest-free
loan from you.
What do you need to file
the 1040EZ tax return?
 W-2 and form 1099 if you have: savings
account or other taxable income.
 ie: prize winnings.
When to you get w-2?
 Has to be mailed to you by JAN. 31st.
 What is it?
 See example on back of W-4 worksheet.
 Shows how much you made from job, how much was taken
out in deductions.
 Should match your last pay stub of the year
 How many will you get?
Tax Deductions:
 What do they do?
Tax Deduction
 Something that reduces the amount of
taxes paid.
 2 types of deductions- Choose one or
the other…
Itemized vs. Standard
Tax Deduction –
Which One Should You Take?
2013 Standard Tax
Deduction
 standard tax deduction is
easiest.
 it’s simply a fixed number
set each year just have to
write it down on your tax
form .
 Nearly 2 out of 3 taxpayers
take the standard deduction
 Get to use the short tax
form,

1040EZ.
 Single $6,100
 Married, Filing
Jointly $12,200
 Married, Filing
Separately $6,100
 Head of
Household $8,950
 Blind or over 65 and
married add: $1,200
 Blind or over 65 and
single/head of household
add: $1,500
2013 Itemized Tax
Deductions:
 But if you think you may have tax
deductions bigger than the standard
deduction
 it may make sense to itemize, even though
it will require better record keeping and a
little more work
 Can not use 1040EZ tax form if itemizing
deductions.
Itemized Tax deductions:
Examples include:
 Mortgage interest.
 Charitable contributions.
 Property taxes.
 State and local income taxes.
 Medical expenses that
exceed 7.5% of your adjusted
gross income.
 Various miscellaneous
expenses that exceed 2% of
your income such as: union
dues, tools and supplies
needed for work, tax
preparation fees, some legal
fees, and many more.
Single person
 For 2013: You could take Standard
Deduction of $6,100
 Or show receipts for Itemized deductions
greater than $6,100.
**Must use one or the other, not both.
Missed deductions can be
the most costly….
 About 48 million of us itemize on our 1040s -- claiming more than
$1 trillion worth of deductions.
 $1,000,000,000,000
 Another 92 million taxpayers claim about $700 billion worth using
standard deductions
 $700,000,000,000

http://www.kiplinger.com/features/archives/the-mostoverlooked-tax-deductions.html#ixzz1XEFxeqJH
Tax Credits = bonuses
 Examples:
 $500 tuition credit
 10% of cost of some Energy Star
Appliances.
 American Opportunity Tax Credit
 up to $2,500 on the first $4,000 of qualifying
educational expenses, which include course
materials as well as tuition.
 First time homebuyers tax credit
 Up to $8000 credit extended to 2010 taxes.
EX: how tax credit works:

Owe $345 in taxes.
 tax credit +$500
________________________
 Now get a $155 refund instead of
paying.
American Opportunity
Tax Credit
up to $2,500 on the first $4,000 of qualifying educational
expenses, which include course materials as well as tuition.
Will be good for 2013-2017 years ($10,000 total)
Families who earn too much can’t claim the credit. The income
phase-out for claiming the AOTC is $160,000 – $180,000 of
modified adjusted gross income on joint tax returns ($80,000 –
$90,000 for single tax filers and head of household).
The amount of the credit is calculated as 100% of the first $2,000
in qualified tuition and fees costs paid, plus 25% of the next
$2,000 paid for such fees.
For lower income taxpayers who don’t owe $2,500 in tax, up to
$1,000 of the credit is refundable. (The credit is not refundable
on a dependent child’s return).
Why are tax credits better
than tax deductions?
2013 tax returns:
 Why is it important for you parents to get
their taxes completed quickly this year?
 FAFSA should be submitted by FEB 28th.
 Need 2013 tax info to complete the
form.
Next, we will complete a
1040EZ tax form.
1040EZ “Easy Form”
 Use the 1040EZ if:
 • Your taxable income is below
$100,000
 • Your filing status is Single or
Married Filing Jointly

• You and your spouse – if married
-- are under age 65 and not blind

• You are not claiming any
dependents
 • Your interest income is $1,500 or
less
 Using Standardized Deduction.
When do you get your
money?
Check the Status Online The fastest and easiest way to find out
about your current year refund is to go to IRS.gov and click the
“Where’s My Refund?” link at the IRS.gov home page. To check
the status online you will need your Social Security number, filing
status and the exact whole dollar amount of your refund shown on
your return.
Check the Status By Phone You can check the status of your refund by
calling the IRS Refund Hotline at 800–829–1954. When you call, you
will need to provide your Social Security number, your filing status
and the exact whole dollar amount of the refund shown on your
return.