5.2 File a Tax Return

Unit 4- Taxes

Tax ReturnForm W-2Form 1099-INTForm 1040EZDependentDeductionSocial Security NumberTaxable income

Key Terms

A tax return is a set of forms that taxpayers use to calculate their tax obligation. (how much income taxes they owe.)

Is everyone required to file a tax return? No, only if you have income above the

minimum amount set each year by the government.

What is a tax return?

Salary or wagesTipsInvestments/Capital GainsInterestJobs paid in cash Lottery winnings

Your Aunt Sue gave you $200 for your birthday, is this taxable income?No, you are not required to pay taxes on gifts

unless they exceed the amount allowed by the government.

Name some types of taxable income!

You must calculate and file your tax return by April 15th for the previous year.

For Example:For the work year January 1, 2010- December

31, 2010W-2 Form provided by employers by January

31, 2011Form 1099-INT provided by banks by January

31, 2011Tax returns due to IRS by April 15, 2011

Taxes Timeline

For most young people these two forms are enough to complete your income tax returns.

1. Form W-2: a summary of your earnings and withholdings for the year.

Comes from your employer Must be provided by employers by January 31 When you file a tax return you must enclose a copy of

your W-2 form. (the IRS also receives one from your employer)

2. Form 1099-INT: a statement of the interest your bank paid on your savings for the year.

2 Sources of Information for Needed for Your Tax Return

All individual tax payers must use one of the following three basic forms for filing a federal income tax return:1. 10402. 1040A3. 1040EZ

Most young people qualify to use the simplest form which is the F0rm 1040EZ.

When you are older and your financial life is likely to be more complicated- you will use a 1040 or 1040A. These forms allow you to itemize deductions to reduce the amount of tax you owe.

Deductions are expenses you can legally subtract from your income before calculating your taxes.

Income Tax Forms

1. Label (Identify yourself)1. Name & Address2. Social Security Number – a unique number

assigned to you by the federal government. Memorize this number, you will have to write it on many official documents.

2. Income3. Works you through to your taxable income-the

income figure that is used to determine your taxes.

3. Payment and Tax4. Federal withholdings + (EIC) = Total Payment5. Tax- use table to calculate your total tax for the

year

How to complete a 1040EZ

4. Refund or Amount you Owe Calculated1. Refunds can be deposited electronically

5. Sign Here2. Signature, Date & Occupation (your signature declares

the information is true)

6. Check for Accuracy and File your Return3. Always check your tax forms4. Pay amount owed by check or credit card (fee for credit

card)5. Send tax form along with W-2 & check 6. Keep copy for your records7. Send by April 15th

How to complete a 1040EZ (Steps 4-6)

Do people who work for themselves pay income tax?If so, how?

Yes, they must file at 1040. Self employed individuals pay estimated taxes in quarterly installments based upon the income they receive each quarter.

Self-employed individuals are required to complete and attach a Schedule C or C-EZ to their 1040 form.

Most important thing to remember about the self-employed- they pay the same taxes that employees pay and they must “withhold” their own taxes and make the payments themselves.

Self-Employment Tax

You may file your tax return online. Biggest advantage- you get your refund faster.

FASTSLOW

On-line returns take 3-4 weeks to process

Snail mail returns can take 6 weeks or more.

One more thing………..electronic filing!

For additional understanding you can complete the four parts of the review: Tax Tutorial, Fact Sheet, Simulation & Assessment for payroll taxes & federal income tax withholding:

http://www.irs.gov/app/understandingTaxes/student/hows_mod01.jsp

After you complete the last step the Assessment, print out your score and hand it in to me for extra credit.

Concept Reinforcement