TAXES & YOUR PAYCHECK
LESSON OBJECTIVE: KNOW ALL THE
FORMS OF TAXATION IN THE U.S. &
BE ABLE TO COMPLETE TAX
DOCUMENTS.
What do all of
these people
have in common?
Income Tax
 Tax Paid on your earnings
 Federal Income Tax & State Income Tax
 Range from 15-35%
 Used to fund??
 Military Defense, Homeland Security, Social Security,
Government Agencies & Jobs, Education, Interest on the
National Debt (~ 9%)
 No Income Tax in AK, FL, NV, SD, TX, WA, and WY.
 NH & TN limit their state income taxes to only dividends and
interest income.
 Raise revenue through higher Sales tax and/or Property Tax.
Sales Tax
 Collected as a % of your purchase
 Highest sales tax in the U.S. is where?
 Tuba City, AZ 13.75% =$1 tax on every $7!
 Chicago 7 L.A. worst among big cities at 9.75%
 No Sales Tax in AK, DE, MT, NH & OR. In MN sales tax on
Food & Clothing is exempt.
 How does Alaska operate with no Income or Sales Tax?
 Petroleum revenues: Alaska Permanent Fund
 Accounts for 85% of state’s revenue & a $1,281 check to each
citizen in 2010!
Other Taxes
 Property Tax: paid on the appraised value of your home
 Funds Schools, Police, Fire, Hospitals, Libraries, local roads,
etc.
 Excise Tax: additional tax on gasoline, tanning, tobacco,
alcohol
 a.k.a Sin Tax
Sources of Federal Government Income
top 1% pay 40 percent of income
taxes; top 20% paid 86 percent of
the income tax
SAMPLE PAYCHECK STUB
Taxable Income:
 The amount of money you will be taxed on
 Ex: $60,000 X 25% = $15,000 / $50,000 X 25% = $12,500
 Income: all money received during the year: salary, wages, tips,
bonuses, dividends, capital gains.
 If you receive over $600 you will receive a 1099
 Tax deductions: expenses incurred to produce income charitable
donations
 Examples: uniforms, gas (55¢ per mile), food
 Others: charitable donations, higher education ($4,000 per year),
educator expenses ($250), property tax, mortgage interest, student
loan interest ($2,500), capital losses (stock market), energy credits
and many more
 Who pays more on their taxes?
 Married OR Single
 With Dependents or without Dependents?
Tax Terms
 W4: fill out when you are hired
 W2: sent to you by your employer, due by Jan. 31 of the next
tax year
 1040EZ: used to complete your taxes, due by???
 April 15
 1099: income for independent contractors
 1099INT: interest income
 Allowance: more allowances you claim on your W4 the more
money you keep now, but have to pay later.
 Do you claim 0 or 1?
 Which is an interest free loan to the government
1040 EZ
1. Wages, Salaries & Tips:
2. Taxable Interest
35,190
200.40
3. Unemployment Compensation & Alaska Permanent Fund dividends
4. Add lines 1, 2 & 3. This is your adjusted gross income
35,390.40
5. If no one can claim you as dependent enter $9,350 if single, $18,700 if
married filed jointly
9,350
6. Subtract line 5 from line 4. Enter -0- if line 5 is larger
26,040.40
7. Federal Income Tax withheld from Forms W2 & 1099
5,578.60
8. Making work pay credit
400
9. Earned Income Credit
10. Add lines 7, 8 & 9
5,978.60
11. Tax use amount on line 6 to find your tax in the tax table
3,485.00
12. If line 10 is larger than line 11, subtract line 11 from 10 and this is your
refund
2,493.60