Transcript Chapter 20. INCOME TAXES How the basic tax laws work… How to Keep Yours at a Minimum… How Audits Work A.

Chapter 20. INCOME TAXES
How the basic tax laws work… How to Keep Yours at a Minimum…
How Audits Work
A. Be Prepared (See Personal Action Worksheet, Text
page 611)
B. The Importance of Knowing About Income Taxes Examples
1. The Pervasiveness of Taxes in our Lives
C. The Basic Concept of Income Taxes - Step-by-step
1. Who must file?
2. Which forms should you use?
3. Choosing your filing status
4. Exemptions and Dependents
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C. The Basic Concept of Income Taxes,
(continued)
5. Declaring your income
a. Taxable income - wages, interest, dividends,
alimony
b. Separately scheduled income - from
business, capital gains, pensions, annuities,
rents, royalties
c. Miscellaneous income - from fees, gambling,
barter, etc.
6. Non-taxable income - gifts, inheritance, life
insurance proceeds, scholarships, etc.
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C. The Basic Concept of Income Taxes,
(continued)
7. Total of all taxable income
8. Minus “Adjustments” - IRA and Keogh payments, alimony paid,
etc.
9. Equals “Adjusted Gross Income”
10. Deductions - To Itemize or claim the “standard deduction?”
a. What is deductible and what is not?
11. Computing your taxes:
a. Adjusted gross income less deductions (standard or
itemized) equals taxable income
b. Subtract value of exemptions
c. Compute from tax tables
d. Add credits, subtract taxes withheld or otherwise paid =
tax due
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D. Tax Cutting Strategies
1. Tax exempt and tax deferred income
2. Tax withholding and the W-4 form
3. Year-end strategies
4. Children’s income
5. Tax “shelters”
E. Filing Your Return
1. Extensions and amended returns
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F. What Happens to Your Return?
Examinations and Audits
1.
2.
3.
4.
5.
6.
Initial screenings
Audits - Why might your return be audited?
Audit strategies - Yours
Audit strategies - Theirs
Resolving an audit if you and the IRS agree
Resolving an audit if you and the IRS
disagree
7. Your best protection
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TALKING POINTS…
Chapter Twenty, Number One
Discuss the pros and cons of these various ways of getting your
income taxes prepared:
1. Doing it yourself using IRS forms and instructions.
2. Buying a computer program to do it for you.
3. Using a tax preparation service that advertises “low prices, bigger
deductions, and fastest refunds.”
4. Using a tax preparation service that is more conservative, and
probably more expensive than the one that advertises.
5. Using a practicing accountant.
6. Using your cousin Murray, who is an accountant. He won’t charge
you but he’ll remind you of that fact often.
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