Paying Your Income Taxes

(1)

Paying Your Income

Taxes

(2)

Tax Cuts & Jobs Act (TCJA) enacted in December 2017

brings changes to tax filing starting with 2019 filing year

•

Some forms were eliminated; everyone will use Form 1040 and add

numbered schedules, as needed

•

Personal exemption deductions for yourself, your spouse, or your

dependents have been eliminated; use these deductions

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2.2.7.G1

What are taxes?

A sum of money

demanded by a

government for

support of itself and

specific programs

and services; paid by

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2.2.7.G1

When do we pay taxes?

When we make a purchase

When we get a paycheck

When we put gas in the car

When we buy a car

Sales tax

Income tax

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2.2.7.G1

Did you know U.S. citizens

have been paying income

taxes for over 100 years?

1862

1913

It’s your

civic

duty

, your

responsibility as

a citizen of the

U.S., to pay your

income taxes.

Congress enacts first income

tax law in effort to support the

Civil War

16

th

Amendment to the

Constitution passes making

income tax on individuals &

businesses permanent

“We are better off in a

community than by

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2.2.7.G1

(7)

2.2.7.G1

What are tax revenues? What

are outlays?

Revenue is money collected from

income taxes which allow our

government to create an

anticipated budget . . .

Outlays refer to the spending or

disbursements of money. Congress

determines the allocation of money

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2.2.7.G1

What is Tax Day?

Wh

at

yo

u

act

ua

lly

pa

id

Wh

at

you

we

re

exp

ecte

d

to p

ay

The deadline to

compare

This process is called

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2.2.7.G1

So where does reconciling

begin?

The W-4 tells your employer:



Your filing status



The number of allowances

you are claiming



How much additional

income to withhold and send

to the IRS

With completing a

Form W-4

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2.2.7.G1

What are allowances?

Rule of Thumb

:

the greater the number

of allowances, the less

money is withheld from

your paycheck

You can claim

allowances for

Yourself

Your spouse

Dependents,

such as a

child

Allowances

are a number that

corresponds to the amount of

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2.2.7.G1

How often do I complete a

W-4?

Every time a major life event happens

*

As a general rule, the fewer allowances you enter on a W-4 Form, the

higher your tax withholding will be

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2.2.7.G1

Let’s practice

with a

Paycheck

This is José Santiago.

He’s a newly hired

$1,360

$17.00 80

$25.50

0

FICA Medicare tax = 1.45%

FICA Soc. Security tax = 6.20%

Arizona State tax = 2.70%

*

use your own state tax

*

Use the “Current Total” figure, which

is José’s gross income, and calculate

his tax deduction & year-to-date

totals for his pay stub using tax %

José Santiago

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2.2.7.G1

If José Santiago is

single

, claims

2

allowances

on his W-4 when he is

hired, and his

bi-weekly

pay is

$1,360

, how much would his employer

withhold for federal income taxes?

His employer

would withhold

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2.2.7.G1

Practice

with

a

Paychec

k

José Santiago

Graphic Artist

José Santiago

$1,360

$17.00 80

$25.50

0

$19.72

$78.88

$84.32

$337.28

$99.00

$396.00

$36.72

$146.88

0

(15)

With

new tax laws, it

might be time to

do a

W-4

Withholding

paycheck

checkup!

Use the

IRS online W-4

Calculator

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2.2.7.G1

What figures do you need to use

the IRS Online Calculator?

The answers are found on your paycheck or W-2

The

year-to-date

number is

the sum

for the

entire year

You can

find

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2.2.7.G1

What is a W-2?

Employers are required to provide you with

a copy of your W-2 Wage and Tax

Statement by January 31

st

of the next year.

A government

form which

shows a

summary of

your income

and

deductions for

one employer

for the

calendar year

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2.2.7.G1

What’s the purpose of a Form

W-2?

For an

employee,

the information

on

your W

-

2

is

important when

preparing

your

tax return.

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2.2.7.G1

What if I was classified as an

independent contractor

instead of an employee?

Independent Contractors

provide

goods or services but

do not have

income tax withheld from payment

.

In this case, you will receive a Form

1099 and may be entirely responsible

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2.2.7.G1

How do I reconcile my income

taxes?

Gather

your

document

s

Obtain a

Form 1040

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2.2.7.G1

taxes?

Step 1

: Gather your

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2.2.7.G1

Using

FORM 1040

•

Taxpayers with straightforward

tax situations only need to file

Form 1040.

•

Those who need to claim

additional income or have

deductions like student loan

interest or child tax credits,

education expenses, etc. will

need to add additional

numbered schedules to their

filing process.

Source: IRS

How do I reconcile my income taxes?

Step 2

: Use Form 1040, and numbered

schedules, as needed

*Revised Form 1040 replaces

Forms 1040EZ, 1040A used in

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2.2.7.G1

Use details from your

W-2

to complete the

personal information

on your tax form

taxes?

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2.2.7.G1

taxes?

Step 3

: Fill out the tax form

You are a

dependent

if

someone

provides the

majority of

your support

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2.2.7.G1

How do I reconcile my income

taxes?

Step 3

Adjusted Gross Income

1. Use information from

your W-2 for the tax

form.

2. Then follow the

directions on the tax

form to add, subtract,

and determine your

adjusted gross

income.

65,120 97

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2.2.7.G1

taxes?

Step 3

Standard Deduction

amounts you can take

On Line 15,

enter your total

On Line 8,

enter your

standard

deduction

amount

On Line 11, you will enter

your tax liability from IRS

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2.2.7.G1

Line 18 is where you

enter the total tax

payments for the year

How much have I paid in taxes?

Step 3

If you have any tax credits you

can claim, you would enter the

amounts on Line 17

16 is where you enter

how much you paid in

federal income tax for

the year. Located on

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2.2.7.G1

Is line 18 is more

than line 15?

YOU GET A REFUND

Is line 15 more

than line 18?

YOU

OWE

How do I reconcile my income taxes?

Step 4

: Reconcile

Compare the amount of income

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2.2.7.G1

How do you read tax

tables?

You are single

Your

taxable income

is $53,120.97

So your

tax

liability

is

$7,627.00

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2.2.7.G1

What is the tax liability?

You

have already met

your tax liability for the

year

and will be owed a

refund from the IRS.

You realized you have

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2.2.7.G1

Before you file

Step 5

: Sign Form 1040 on Page 1

Sign the form

(Spouse must also

sign if filing

jointly)

Use today’s date

Be sure to

include your

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2.2.7.G1

Step 6

Options for filing your taxes:

e-File your forms

You will need a six

digit Identity

Protection (IP) PIN

for each person to

e-File your taxes

•

Use IRS free fillable forms to do your taxes online.

*

Your adjusted gross income must be $66,000 or less to use this service.

•

Use commercial tax prep software to prepare and

e-File your taxes.

•

Tax pros accepted by IRS electronic filing program are

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2.2.7.G1

Step 6

Options for filing your

taxes: by mail

(and include a check for any tax you

owe)

The state in

which you live

in determines

where you mail

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2.2.7.G1

Why should I

prepare my

own tax return?

1. You can save money.

a. The IRS does not charge to

file taxes.

b. The IRS provides free filing

software for taxpayers

c. The IRS provides free

fillable forms online

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2.2.7.G1

When should I prepare my tax

return myself?

1. When your life is simple – no dependents,

investments, significate assets, or

charitable contributions, and you don’t

own a business.

2. You have the time and patience to

complete the paperwork

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2.2.7.G1

Let’s Practice with a

partner

or in small groups

Use the

information on

the following

slides to practice

completing a tax

return using the

IRS Form 1040

(37)

Meet Darcie & Jeff Naylor

(W-2 Info Included in following slides)

•

Since they plan to file a

joint return, you will

need to include both

incomes on Form 1040.

•

If they get a refund,

they want the money

to be deposited into

their checking account

• Darcie is a Chef and teaches

cooking at “The Cook Shop”

• Jeff is a computer networking

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2.2.7.G1

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2.2.7.G1

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2.2.7.G1

Insert personal information for the Naylors

(front side Form 1040)

Jeff D. Naylor

Darcie I. Naylor

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2.2.7.G1

Insert income information for the Naylors

(back side Form 1040)

•

The Naylors combined income totals $106,325.00.

o

Note: You would use Schedule B (Form 1040) if you had over $1,500 of taxable

interest

or ordinary dividends. *Source: IRS.gov

•

The Naylors’ followed the directions written on the Form 1040 and added the

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2.2.7.G1

Applying the Standard Deduction to help the

Naylors find their taxable income

•

The Naylors take the standard deduction for “Married filing jointly” which

allows them to subtract $24,000 on Line 8.

•

Their Taxable Income is shown on Line 10 after they subtracted lines 8 and

(43)

2.2.7.G1

Calculate the tax liability of

the Naylors Using Form 1040

& IRS Tax Tables

•

Step 1

: Find the taxable income total from Line 10 of Form 1040

o

Answer = $82,325.00

•

Step 2

: Use the

IRS Tax Tables

found in the IRS 2018 Instructions

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2.2.7.G1

Locate the

range where

your

taxable

income

falls

The place where

those two items

intersect

identifies the

tax

liability

for the

year

Locate your

filing

status

– single or

married?

•

Step 3

: Locate

the column

for

“Married filing jointly” for the

Naylors.

•

Step 4

: Locate

the row

that

shows

the range

of the Naylors’

taxable income of $82,325.00

would fall.

•

Note – the line that allows

the Naylor’s income is

shown as

“At least $82,300

but Less than $82,350”

.

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2.2.7.G1

IRS

Tax

Tabl

es

Tax

Liability

for the

Naylors

(46)

2.2.7.G1

Insert the total tax liability for the Naylors

•

Following directions on Form 1040, the Naylors enter their combined tax liability

(amount they owe for federal income taxes for the past year) on Lines 11, 13 and 15.

•

The Naylors do not claim any dependents and have not paid any other taxes,

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2.2.7.G1

Add up the total federal

income tax paid by the Naylors

•

Step 1: Locate the W-2 Forms for both Jeff & Darcie.

•

Step 2: Find the section on the

W-2 Form

that reveals how much

each individual

paid federal income tax

for the year.

•

Darcie paid $ 4,200.00

•

Jeff paid $ 8,845.00

•

Step 3: Add Jeff and Darcie’s federal income taxes paid to arrive at a

total amount paid.

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2.2.7.G1

Total tax payments made by the Naylors

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2.2.7.G1

Reconciling your taxes:

Have the Naylors met their tax liability?

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2.2.7.G1

Signature Section – Found on Page 1 Form 1040

Be sure to sign and date your form

Jeff D. Naylor

Darcie I. Naylor

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2.2.7.G1

(52)

Performance Task

Given a scenario, you will now complete a tax form on your own

to demonstrate the ability to

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