TAXES

By Ben Orner

WHY DO I HAVE TO PAY TAXES?Governments tax their citizens in order to pay salaries for thousands of employees, and provide services for millions of citizens. Taxes are the government’s biggest source of income, bringing in $1.236 Trillion in 2006. HOW MUCH WILL MY TAXES BE FOR THIS YEAR?It depends. Citizens with the highest income have the biggest tax rates. Also, there are many tax breaks for people with financial burdens, such as starting a business, going to college, or rewards for actions like giving to charity.

Background on Taxes

Most common federal tax form Reports wages paid to employees and taxes

withheld from them Also reports FICA taxes to the Social Security

Administration Employers must complete and give each

employee a W-2 by January 31st

Your W-2’s must be attached to your tax return when you file

Forms: W-2

The form a person fills out when they first start to

work Tells the employer your tax filing status and the

number of exemptions you want to apply to your federal withholding on your wages

A lot of people put that they’re single with zero dependents

When they file their income tax returns, they've had more withholding taken out than was needed,y so they can get a refund instead of owing.

Forms: W-4

For income other than wages, salaries, and

tips A statement you receive from payers of

interest income, such as banks and savings institutions, that summarizes your interest income for the year

Forms: 1099 Form

When you file your income tax return, you’ll

use this form (The Individual Income Tax Return)

By filling it out properly, you will learn if you owe money to the government or if the government owes you money

Forms: 1040A

The simplest tax form Limited to taxpayers with taxable income

below $100,000 who take the standard deduction instead of itemizing deductions

Many unmarried people with no children also qualify to use this form

Forms: 1040EZ

1 Determine whether you have to file a federal income tax

return. If your income is low, you may not have to file. But even children have to file if they meet certain income levels or have certain types of income.

2 Find out what filing status you qualify for. 3 Determine how many personal and dependent exemptions

you have. Personal exemptions are for yourself and your spouse. Anyone can be your dependent if he or she qualifies.

4 Calculate your income. Many types of money you receive can be taxable income, but some types are not.

5 Calculate your income adjustments. You are allowed to subtract some things from your income and lower your taxes.

6 Calculate your deductions. You can choose between a standard deduction and itemized deductions. Deductions lower the amount of your income that is subject to taxes.

How to File Federal Income Tax

7 Determine your income tax. Taxable income minus adjustments,

minus deductions, and minus exemptions equals the income on which you are taxed. Tax tables or schedules will tell you how much your income tax is.

8 Determine your credits. You can get credits against your income tax for certain situations or expenses.

9 Determine your additional taxes. In some circumstances - for example, if you are self-employed - you may have to pay additional taxes.

10 Find out your total payments. This includes taxes withheld by your employer, estimated tax payments you made, and the earned income credit. The total is how much you have paid or has been paid for you.

11 Find out the amount you have overpaid or underpaid. This will be your refund or the amount of tax you still have to pay. You could have a penalty for underpaying your taxes, but only if you were off by a significant amount.

12 Get the right tax forms and fill them out.

How to File Federal Income Tax

Go to http://

www.hrblock.com/free-tax-tips-calculators/tax-estimator.html?fil_st=0&wages=50,000&tpage=18

To find out how much you have to pay, you will need to know certain things, such as… Filing status, age, dependents Total 2012 wages, income other than wages Expenses, such as state tax, charitable

donations, mortgage, student loans, and job expenses

How Much Will I Pay in Taxes This Year?

ww.irs.gov Use an income tax calculator

H&R Block, Jackson Hewitt, TurboTax, TaxSlayer

Additional Information

Our economics textbook Ehow.com HRBlock.com

Sources