Individual Tax outline
►Introduction to Income Taxes
►What are taxes?
Payment required by a government upon income earned by individuals, businesses and other taxable entities that is unrelated to any specific benefit or service received from the government
Types of taxes:
Property taxes
Sales taxes
Gas taxes
Payroll taxes
►Progressive/graduated tax
Generally, rates increase as income increases
►Federal income taxes
►FORMULA:
►Income (very broadly inclusive)
►LESS: Exclusions (income not subject to taxation)
►EQUALS Gross income
►LESS: Deductions for adjusted gross income
►EQUALS Adjusted gross income
►LESS: Greater of itemized deductions or standard deduction
►LESS: Personal exemptions
►EQUALS Taxable income
►MULTIPLIED BY: Tax rate
►EQUALS Tax owed
►LESS: Tax credits
►LESS: Tax prepayments/withholdings
►EQUALS Tax owed/refund
►ARQ: In the income tax formula, which of the following items appears before the others?
►ARQ: In the income tax formula, which of the following items appears after the others?
REQUIRED to withhold taxes from your paycheck or to make estimated prepayments of tax potentially owed at year-end
►State income taxes
Similar to federal income taxes
►Local income taxes
►Calculation of Income Taxes
►Filing requirements
►Who must file?
►Individuals IF:
►Gross income ≥ personal exemption amount ($3,900) PLUS applicable standard deduction (and any age 65 additional standard deduction only)
►Self-employed with net earnings greater than $400
►What is your filing status?
►Single
Unmarried or separate from spouse by decree, or married TPs who live apart
Look at the last day of the tax year, except if spouse dies during the year
►Married filing jointly
Married spouses only
Unique circumstances:
►Married filing separately
Each spouse reports his or her income, exemptions, deductions and credits
►Surviving spouse
If spouse dies, surviving spouse can file as married for two additional years so long as maintain a household for dependent
►What are taxes?
Payment required by a government upon income earned by individuals, businesses and other taxable entities that is unrelated to any specific benefit or service received from the government
Types of taxes:
Property taxes
Sales taxes
Gas taxes
Payroll taxes
►Progressive/graduated tax
Generally, rates increase as income increases
►Federal income taxes
►FORMULA:
►Income (very broadly inclusive)
►LESS: Exclusions (income not subject to taxation)
►EQUALS Gross income
►LESS: Deductions for adjusted gross income
►EQUALS Adjusted gross income
►LESS: Greater of itemized deductions or standard deduction
►LESS: Personal exemptions
►EQUALS Taxable income
►MULTIPLIED BY: Tax rate
►EQUALS Tax owed
►LESS: Tax credits
►LESS: Tax prepayments/withholdings
►EQUALS Tax owed/refund
►ARQ: In the income tax formula, which of the following items appears before the others?
►ARQ: In the income tax formula, which of the following items appears after the others?
REQUIRED to withhold taxes from your paycheck or to make estimated prepayments of tax potentially owed at year-end
►State income taxes
Similar to federal income taxes
►Local income taxes
►Calculation of Income Taxes
►Filing requirements
►Who must file?
►Individuals IF:
►Gross income ≥ personal exemption amount ($3,900) PLUS applicable standard deduction (and any age 65 additional standard deduction only)
►Self-employed with net earnings greater than $400
►What is your filing status?
►Single
Unmarried or separate from spouse by decree, or married TPs who live apart
Look at the last day of the tax year, except if spouse dies during the year
►Married filing jointly
Married spouses only
Unique circumstances:
►Married filing separately
Each spouse reports his or her income, exemptions, deductions and credits
►Surviving spouse
If spouse dies, surviving spouse can file as married for two additional years so long as maintain a household for dependent