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Transcript of © South-Western Educational Publishing Chapter 7 Federal Income Tax Our Tax System Based on...
![Page 1: © South-Western Educational Publishing Chapter 7 Federal Income Tax Our Tax System Based on voluntary compliance Filing Tax Returns Must be done.](https://reader030.fdocuments.us/reader030/viewer/2022033103/56649de85503460f94ae1d6e/html5/thumbnails/1.jpg)
© South-Western Educational Publishing
Chapter 7 Federal Income Tax
Our Tax System Based on voluntary compliance
Filing Tax Returns Must be done by April 15
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GOALSGOALS
© South-Western Educational Publishing
Lesson 7.1
Our Tax System
Discuss the purpose of taxes and different types of taxes in the United States.
Describe components of the U.S. tax system.
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Why Pay Federal Income Taxes?
Federal level National Defense National Weather Service National Parks Interstate highways Student loans and other aide Relief agencies Regulatory agencies
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Why Pay State and Local Income Taxes?
EducationState welfare programsStreets, roads, and highwaysPolice, fire, and health departmentsLocal recreation and state parks
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© South-Western Educational Publishing
Types of Taxes
Progressive taxes Income Taxes
o Based on the ability to pay
The more you earn the more you pay More of a burden to the wealthy
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Types of Taxes
Regressive taxes Sales tax
o Indiana 7%, TN 10%
Burden on poor/lowest wage earnersProportional taxes
Property tax Tax burden is equally distributed
according to property values
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© South-Western Educational Publishing
Components of the Tax SystemThe IRS (Internal Revenue Service)
Primary job is to collect taxes
The power to tax Approved and changed by Congress &
PresidentPaying your fair share Tax brackets: % increases with income
Tax evasion: not paying taxes intentionally
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© South-Western Educational Publishing
IRS Audit
Correspondence auditField audit
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GOALSGOALS
© South-Western Educational Publishing
Lesson 7.2
Filing Tax Returns
Define tax vocabulary. Prepare tax Forms 1040EZ and
1040A.
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Filing Status
Single personMarried person filing a joint returnMarried person filing a separate
return“Head of household”Qualifying widow(er) with a
dependent child
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Exemptions
Personal exemptionDependent exemption
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Gross Income
Wages, salaries, and tipsInterest incomeDividend incomeUnemployment compensationSocial security benefitsAlimony
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Adjusted Gross Income
Gross income
– Adjustments
Adjusted gross income
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Taxable Income
Gross income
– Adjustments
Adjusted gross income
– Deductions
– Exemptions
Taxable income
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Deductions
ItemizeStandard deduction
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© South-Western Educational Publishing
Tax Credits
For college tuitionFor childcare to enable parents to
workFor lower-income wage earners
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Taxes and Behavior
Business tax creditsSin Taxes
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Preparing to File
Who must file?When to file?Which form to use?Where to begin?Filing electronically
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Preparing Your Income Tax Return
Tax preparation softwareForm 1040EZForm 1040A
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Form 1040EZ
Step 1: Name, address, and social security number
Step 2: Report incomeStep 3: Compute taxStep 4: Refund or amount owedStep 5: Sign the return
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Form 1040A
Step 1: Name and addressStep 2: Filing statusStep 3: ExemptionsStep 4: Total incomeStep 5: Adjusted gross income
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Form 1040A (continued)
Step 6: Taxable incomeStep 7: Tax, credits, and paymentsStep 8: Refund or amount owedStep 9: Signature