Taxes

What are taxes?

A Tax History

A tax

Percentage levied against a good, service, income, property, or investments

Paid involuntarily to town, state, or federal governments

Why Taxes Are Collected...

Keep Areas Maintained

Finance Projects

Support Common Resources

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Ex. Building a town library

Ex. Keeping state beaches clean

Ex. Paying for military expenses

Who collects the tax & how the money is used depends on the type of tax

Internal Revenue Service (IRS)

Come after you if you do not pay your taxes

Government tax collection agency

Video Example

5 Main Types Of Taxes

Sales Tax

Income Tax

Capital Gains Tax

#2

#4

#1

#3

#5

Payroll Tax

Property Tax

Sales Tax

Sales Tax

Percentage levied by the state government against certain goods and services

Example...

Lets say you live in New York, and sales tax on clothing is 8%...

If you want to buy a hat, you are going to pay the hat price plus the added tax.

If the hat has a $30 price tag, and the sales tax is 8%, how much will you pay in total for the hat?

$30.00 price * 0.08 tax = $2.40

$30.00 price + $2.40 tax =

$32.40 final price with sales tax

In this situation...

The clothing store is a custodian of the state

Custodian of the state

= collects sales tax from customers and sends it to the state; usually quarterly

Sales Tax Revenue

Sales tax money collected that is used to pay for state government operations, state parks, jails, hospitals etc.

Payroll Tax

Payroll Tax

Percentage levied by the federal government against personal income

This tax goes towards Medicare & Social Security

FICA Taxes

Social security & Medicare =

FICA taxes

(Federal Insurance Contribution Act)

Medicare

Social Security

Federally funded program for broad services such as retirement, disability, and death benefits

Federally funded social insurance program for retired Americans

Paying this tax is not optional

If you work and are not exempt...

Medicare

6.20 %

1.45 %

Social Security

Your employer does not keep these taxes though, and they are a

custodian for the federal government...

Custodian for the federal government = collects taxes from consumers/workers and send them to the federal government

Income Taxes

Income Taxes

Percentage levied by the federal government against personal income

Used for veteran benefits, military, transportation, law enforcement, etc.

Income Taxes

More money you make = more you get taxed

The income range you fall in determines the % you get taxed

Income Taxes

Exempt Income

Taxable Income

Income that CANNOT be taxed

Income that

CAN be taxed

Employee compensation

(Salaries, wages, commission, fees, tips)

Private disability insaurnce &

workers compensation

Can pay in 2 ways...

Lump Sum

Payroll Deduction

But if you do not pay...

The IRS will come after you by April 15th!

Property Tax

Property Tax

Percentage levied by the local government against the market value of personal and business property

Represents a dollar amount the buyer would be willing to pay for the property

Effected by supply and demand

Market Value

Property Tax Features

Not all jurisdictions charge this

Can be paid monthly in your mortgage

Capital Gains Tax

Capital Gains Tax

Percentage levied by the federal government against profit from investments

Example...

Jessica bought a software company's stock for $150 dollars last April

By September the stock raised to $350

Jessica decided to sell her stock and made a capital gain of $200

Example...

Jessica may have made $200, but she will have to pay a capital gains tax on it

Capital Gains Tax

Must file tax returns yearly

Yearly

Tax return = report used to calculate taxes owed

Tax Deductions

Form 1099-MISC

Schedule

C-Form

1040-EZ Form

Tax Issues

Willingly & intentionally falsifies info. on tax return

Fraud

Tax

Try to lower tax liability

Can be a business

or individual

Tax Fraud

Tax Evasion

Punishable

By

Failure to pay tax liabilities

Law

Tax Evasion

Tax Evasion