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“Certainty? In this world nothing is certain but death and taxes.”
― Benjamin Franklin
What does it mean to do taxes?
Many people cannot tell you what it actually means to do taxes. All though taxes require filling out loads of paperwork, the act of doing taxes is really just comparing two numbers at the end of the year. Those numbers are how much money was taken out of your pay, and how much you owe all together. Many people end up having to pay more money to the government at the end of the year. At the same time many people are receiving there money back from the government. When you do your taxes you are changing the number you owe to the amount you actually owe. There are many different variables that can effect the amount of money you owe to the government.
What are taxes?
when you are taxed that means that a portion of the money you make(depending on your total income) is taken out of your check for things such as government funding, health care, and social security. these are important because this money is given to the military as well as a budget for keeping roads and highways safe and drivable as well as other things sponsored by the government. some of this money that is taken out comes back to you in the form of medicare and social security. so when you retire you will have health care and receive social security money as income to support your self.
What things are.
is a form that an employer must send to an employee and the IRS at the end of the year. This form reports an employee’s annual wages and the amount of taxes withheld from his or her paycheck.W-2 forms are forms that the employers fill out as opposed to W-4 forms which are filled out by the employees.
is a form completed by an employee to indicate his or her tax situation (exemptions, status, etc.) to the employer. This form tells the employer the correct amount of tax to withhold from an employee's paycheck. A W-4 form can be filed anytime when your situation changes. A change in status can result in more or less tax being withheld.
is an alternate form to the IRS income tax form. It provides a faster and easier way for taxpayers with rudimentary tax situations to file taxes. In order to be eligible to use this form, an individual must have a taxable income of less than $100,000, interest income of $1,500 or less, possess no dependents and fulfill other requirements set by the IRS. For most individuals, the 1040EZ is the first tax form they will fill out. This is because only the most basic information is needed to determine whether any money is owed or refunded
You should understand certain paperwork and tax forms.
There are many tax forms that will be unfamiliar to you as a teenager that you will need to use right away in the workforce. Here are then most crucial forms you will need to know about:
When you get a job, you will need to fill out what is called a
When you get paid, there will be deductions taken off of your gross income. These are explained on your
Pay Check Stub.
At the beginning of the next year, you will receive a
If you have been doing self-employment work, such as mowing lawns, you will need to fill out a Schedule C form.
A schedule C form is used to report income and expenses if the taxpayer was a sole-proprietor, or the owner of an unincorporated business. This form can also be used to report non-employee compensation, some miscellaneous income items, and their expenses.
You should know that if you work and earn income (minor or large), you will have to pay taxes
Age is not a factor when determining whether or not a person has to pay income tax. If you receive a paycheck from a company, the company will take taxes from that pay. Also, if you make over a certain amount in a given year, you will have to file an income tax form and pay taxes on the appropriate amount.
Note that there may be times when he does not have to file an income tax form but, it may benefit him to do so anyway.
you will not have to file taxes if you do not generate over a certain amount during the year.
Adjusted Gross Income –
A measure of income used to determine how much of your income is taxable. Adjusted gross income is calculated as your gross income from taxable sources minus allowable deductions, such as unreimbursed business expenses, medical expenses, and deductible retirement plan contributions.
An income tax is a tax that governments impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund. Income tax is a key source of funds that the government uses to fund its activities and serve the public.
A Self-employment tax is a tax imposed on self-employed people, who pay the tax in order to receive social-security benefits upon retirement. Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits.The self-employment tax may be reduced if the person paying the tax also pays social security and Medicare taxes through another employer
- A direct tax is a tax that is paid directly by an individual or organization to the imposing entity. A taxpayer pays a direct tax to a government for purposes such as including real property tax, personal property tax, income tax or taxes on assets. Direct taxes are different from indirect taxes, since the tax is levied on one entity (such as a seller), and paid by another, (such a sales tax paid by the buyer in a retail setting.)
A corporate tax is a levy placed on the profit of a firm. Different rates are used for different levels of profits.
A retirement tax is used to fund social security systems which, in turn provides income to retired workers.
Capital Gains Tax-
A capital gains tax is a type of tax levied on capital gains incurred by individuals and corporations. Capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price
– A poll tax is a tax collected at a fixed amount per individual. It is also know as per capita tax/capitation tax.
– An Excise tax is computed independently of the value of the product being taxed, and instead are based on the quantity of the product that is being purchased. Gasoline is a prime example, which has about 8-28 excise tax cents per gallon. Sales tax is an example of an excise tax.
–A tariff is a fine on goods that have been imported or exported. Percentages of tariffs are set by the country that is importing the goods to help the goods made in their country.
Value Added Tax
–A value added tax is a type of consumption tax that is placed on a product whenever value is added at a stage of production and at final sale. The amount of value-added tax that the user pays is the cost of the product, less any of the costs of materials used in the product that have already been taxed.
A property tax is a tax assessed on real estate by the local government. The tax is usually based on the value of the property (including the land) you own.
A wealth tax is a tax based on the market value of assets that are owned. These assets include, but are not limited to, cash, bank deposits, shares, fixed assets, private cars, assessed value of real property, pension plans, money funds, and owner occupied housing and trusts.
Deductions let you keep more money while doing taxes because of something you do or have that makes you abnormal. for example volunteering at places such as food pantries or give back to the community you can usually receive tax deductions.
a couple of ways you can receive deductions are
participating in charitable contributions
different types of health insurance
if you are a qualified teacher or educator
if your education cost more money
if you are environmentally friendly (solar panels, wind power, hydrothermal heating, fuel efficient cars, ect.)
disaster areas where you live.(if where you live is declared by the president as a disaster area you can receive tax deductions.
if you retire
THINGS YOU SHOULD KNOW ABOUT TAXES
You should know how tax money is used by the government.
Taxes are a very important and necessary key to success for our country. all though they are frightening and confusing the government needs money to help run what we know as our country. with out this money we will not be as safe, big highways will not be mended, space exploration will be cut as well as deep sea exploration, law enforcement will have massive budget cuts as well as any aid to foreign country's that help build important allies will not be possible. all of this we take for granted will come to nothing and our country will fail. as you can see it is very important to pay taxes.
You should know that babysitting and mowing lawns are considered earned income by the United States Government.
This means that you will have to pay self-employment taxes on it if the amount is above what is set for that year. For example, in the year 2008, if you brought in more than $400.00 (amount set for that year) of self-employment income, you would have to pay self-employment taxes.
You should know about minimum wage
federal minimum wage is $
.00 an hour
, but if you’re under 20 years old and you’re a new hire, the business can legally pay you $4.25 for the first 90 days of your job. There are also exceptions to the minimum wage laws for student workers, student learners and persons with disabilities. If you fall into one of those categories you may not receive the $8.00 per hour even if you work longer than 90 days.
minimum wage for people who get tips is $2.13 per hour
, (restaurant staff) if that amount plus your tips brings you up to the minimum wage. If you’re working in a restaurant keep really good track of the tips you receive.Also if you do not make a combine total of minimum wage your employer must compensate the necessary amount.
You should know about Social Security and Medicare
When you get your first paycheck, you will be paying social security and medicare taxes. In both 2011 and today in 2012, the combined tax rate for Social Security and Medicare is 7.65% . The Social Security portion is 6.20% on earnings up to the applicable taxable maximum amount. The Medicare portion is 1.45% on all earnings.
For example; let us say you worked 20 hours at $8 an hour. Your pay should be $160. But because of taxes, your check will only be $147.76. Between Social Security ($9.92) and Medicare ($2.32) you are getting a total of $12.24 taken out.
Social security is important because when you retire or can no longer work you have a money source to draw from. This is especially important if you are disabled and cannot work because you have this money you can use.
Medicare is also very important because it covers your medical bills once you retire. medical bills can get very pricy so it is very important to pay this in case later in life you need it when you can not work any more
The image above shows the increase in Social Security and Medicare tax from 1970-2010. It also shows the prediction of the tax over the next 70 years. The main line to look at here is the blue. SMI (which is Social Security) and HI (which is Medicare).
The red line indicates trust funds that do not relate to the issues this specific wiki talks about)
these are some fun interesting facts about taxes...
The first income tax was in England in 1404
income tax was first introduced into America during the civil war
the first american income tax was in 1798
Peter the Great taxed people on their beards.
in the UK every one pays a T.V. tax of 126 pounds blind people are only required to pay about half of the cost.
there are about 7 million words in the tax laws.
the IRS sends about 300,000 trees worth of paper every year(8 billion forms)
the easiest form has 35 pages of instructions(1040EZ)
for every 100$ the IRS collects it only cost them 39 cents.
there are 114,000 workers in the IRS
61%of Us corporations paid no income tax last year
94% of corporations pay around 5% of their total income tax.
You can find many useful tips and information at the following tax sites below.
*Information and pictures arranged by Benjamin O'neil and Shane Neilson
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