Unit 4
Money Management
Taxes and Your Paycheck
► Terms
•
•
•
•
•
to Examine
Income Tax
FICA
Gross income
Net income
IRS
Sample Paycheck Stub
W-4 Form
Proper Withholding
•
Paying Too Much
•
Withholding Too Little
1.
Common with students
who work only in summer
Forced Savings Program
1.
Sending extra payments to
the IRS
2.
Claiming fewer allowances
2.
3. Specifying extra money to
be withheld on W-4
Filing a Tax Return
► Income
– wages, tips, interest from savings
► Employers
will send a Form W-2 by January
31. The form summarizes earnings and
withholdings for the year for a specific job.
►A
copy of your W-2 Form is sent to the IRS
by your employer.
Form W-2
Form 1099-INT
Taxes the EZ Way
People who can use a Tax Form 1040EZ:
Single or married and filing jointly with your spouse
 Person who has no dependents
 You and spouse are under age 65
 Neither you or your spouse is blind
 Have a taxable income of less than $50,000
 Earned no more than $400 in interest
 No income other than wages, interest, tips, scholarships,
or unemployment compensation

Form 1040EZ
Form 1040 (“complicated”)
Completing the 1040 and 1040EZ Forms
► Information
to Understand/Remember:
Social security number
Total wages, salaries, and tips
Taxable Interest Income
Unemployment Compensation
Adjusted Gross Income
Deductions
Taxable Income
Taxes and Government
Sources of Federal Government Income
Compare The Following Internet Information to Textbook
(pg. 171)
Principles of Taxation
►
Benefit Principle
those who use a good or service
provided by the government should
pay for it
►
Ability-to-pay-principle
those who have larger incomes
should pay a larger share of what
they receive
(Federal Income Taxes=15%-39.6%)
How Taxes are Collected
► Direct
Taxes
Ex. Income taxes and property taxes
► Indirect
Taxes
Ex. Renting and paying property taxes
► Pay-as-you-earn
Taxes
Ex. Federal Withholding
Types of Taxes
►
Income Tax
►
Sales Tax
►
Property Tax
►
Excise Tax
►
Estate Tax
►
Gift Tax
►
Business or License Tax
U.S. Government Spending
1.
2.
3.
4.
5.
6.
Social Security, Medicare, and Other Retirement
(37%)
National Defense, Veterans and Foreign Affairs
(20%)
Social Programs (18%)
Net Interest on the Debt (15%)
Physical, Human and Community Development
Law Enforcement and General Government
Pg. 176 in textbook
State and Local Governments
Provide the Following:
Building and maintaining local roads
Operating police and fire protection services
Maintaining a criminal justice system
Building and staffing public schools
Building and operating state colleges and
universities
 Supporting hospitals and other medical facilities
 Constructing and operating sewage treatment
plants
 Operating unemployment compensation programs
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