Federal Income Tax

CONT 110

Terms • Adjusted Gross Income• Adjustments to Income• Earned Income Tax Credit• Estimated Tax Payments• Exemptions • Health Savings Account (HSA)• Individual Retirement Account (IRA)• Itemized Deductions• Standard Deductions• Tax Credits• Taxable Income• Total Income

Collect Information to prepare federal income tax

• Social Security Number• Form W-4 (Employee’s Withholding Allowance

Certificate)• Form W-2 (Wage and Tax Statement)• Annual 1099 form

Calculate federal income tax using Form 1040EZ

• Used when:– Filing status is single or married filing jointly.– You do not claim any dependents– You do not claim IRAs, alimony paid, bad debt

deduction, moving expenses, educator expense deduction

– You claim only the earned income credit– Your taxable income is less than $100,000

• Taxable income = Total income – Standard Taxable income = Total income – Standard deduction - Exemptionsdeduction - Exemptions

Calculate federal income tax using Form 1040EZ

• Example:– Brian Phillips is single and a student with only part-

time wages and a small amount of interest income. – STEPS:

• Calculate the adjusted gross income– $12,550 + $780 =$13,330

• Calculate the taxable income– $13,330 - $8,950 = $4,380

• Find the income tax in tax tables– $438

• Subtract to find the difference between the tax and the amount of taxes paid to see if additional tax or refund is due– $1,005 - $438 = $567

Tax table

Calculate federal income tax using Form 1040A

• Used when:– You only had income from wages, tips, salaries,

interest and ordinary dividends, capital gain distributions, taxable scholarship and fellowship grants, pensions, annuities, IRAs, unemployment compensation, taxable social security and railroad retirement benefits.

Calculate federal income tax using Form 1040A

• Katherine Grayson is single. Complete Form 1040A for Katherine Grayson using her Form W-2 and her Form 1099-1NT. Katherine also has a $2,000 IRA contribution.– STEPS:

• Determine the personal exemptions– Katherine is single, so she has one exemption

• Calculate the total income– $18,950 + $752 = $19,702

• Calculate the adjusted gross income by subtracting $2,000 IRA contribution from the total income– $19,702 - $2,000 = $17,702

• Subtract the standard deduction from the adjusted gross income– $17,702 - $5,450 = $12,252

• Subtract any exemptions to find taxable income– $12,252 - $3,500 = $8,752 taxable incometaxable income

• Find the income tax in the tax tables $899• Subtract the tax from the amount of taxes paid to find the amount of tax due or refund

due– $950 - $899 = $51 refund duerefund due

Línea 7 Form 1040A

Línea 38Form 1040A

Línea 8A Form 1040A

Form W-2

Form 1099-INT

Tax table

Form W-2

$438 Brian’s taxLínea 11 Form 1040EZ

$899 Katherine’s taxLínea 37 Form 1040A