Chapter 4: Managing Taxes

Objectives

• Explain how taxes are administered and classified.

• Describe the concept of the marginal tax rate.

• Determine who should file an income tax return.

Objectives

• Describe the two ways of paying taxes: payroll withholding and estimated taxes.

• Identify the eight planning steps involved in calculating federal income taxes.

• Understand planning strategies to legally avoid overpayment of income taxes.

• Explain the basics of IRS audits.

What is Tax Management?

• Reduction

• Deferment

• Elimination

ATTENTION!

A PLANNING PROCESS FOR TAX:

• Federal tax laws

• Progressive nature of income tax

• Regressive

• Marginal tax rate

• Effective marginal tax rate

• Average tax rate

Administration/Classification of Income Taxes

The Progressive Nature of the Federal Income Tax-2009

If your taxable income is:Over:

But notover -- The tax is:

Of theamountover--

$0 $8,350 ------------ 10% $0

8,350 33,950 $835.00 + 15% 8,350

33,950 82,250 4,675 + 25% 33,950

82,250 171,550 16,750.00 + 28% 82,250

171,550 372,950 41,754.00 + 33% 171,550

372,950 ---------- 108,216.00 + 35% 372,950

If your filing status is Single

The Tax Rate Schedule is shown so you can see the tax rate that applies to all levels of taxable income. It is not used to figure ones’ taxes.

The Progressive Nature of the Federal Income Tax-2009

If your taxable income is:Over:

But notover -- The tax is:

Of theamountover--

$0 $16,700 ------------ 10% $0

16,700 67,900 $1,670.00 + 15% 16,700

67,900 137,050 9,350 + 25% 67,900

137,050 208,850 26,637.50 + 28% 137,050

208,850 372,950 46,741.50 + 33% 208,850

372,950 ---------- 108,894.50 + 35% 372,950

If your filing status is Married filing jointly

The Tax Rate Schedule is shown so you can see the tax rate that applies to all levels of taxable income. It is not used to figure ones’ taxes.

• Earned income

• Unearned income

• Transfer payments

Who Should File a Tax Return?

STUDENTS WITH: