Taxes U16

PURPOSE OF TAXES

• provide revenue for federal, local, and state governments to fund essential services--defense, highways, police, a justice system--that benefit all citizens, who could not provide such services very effectively for themselves.

• Taxes shift resources from private individuals and businesses to the government in order to pay for public goods and services, regulate the economy, and redistribute income. The government uses money to pay for three general types of expenses: purchases, transfer payments, and interest payments.

• The federal government collects revenue from a variety of sources, including individual income taxes, payroll taxes, corporate income taxes, and excise taxes. It also collects revenue from services like admission to national parks and customs duties.

• Taxes are used to provide public services that taxpayers value— such as education, parks, roads, and public safety. Without taxes, citizens either would have to pay directly for acquiring such services or forgo them altogether.

W-2

completed by an employer and contains

important information that you need to

complete your tax return. It reports your

total wages for the year and the amount

of federal, state, and other taxes withheld

from your paycheck.

W-4

completed by employees

and given to their employer

so their employer can

withhold the correct

federal income tax from

the employee's pay.

IT-2104/IT-2014E

completed by you, as an

employee, and given to your

employer to instruct them how

much New York State (and New

York City and Yonkers) tax to

withhold from your pay and send

to the New York State Tax

Department on your behalf.

FICA TAXES: THE FEDERAL INSURANCE CONTRIBUTIONS ACT

UNITED STATES FEDERAL PAYROLL

CONTRIBUTION DIRECTED TOWARDS BOTH EMPLOYEES AND EMPLOYERS TO FUND SOCIAL SECURITY AND

MEDICARE—FEDERAL PROGRAMS THAT PROVIDE BENEFITS FOR RETIREES, PEOPLE WITH DISABILITIES, AND

CHILDREN OF DECEASED WORKERS.

payroll / employment taxes purpose

--Governments use revenues from payroll taxes to fund specific programs, including Social Security, healthcare, and

workers' compensation, disability compensation. Local governments may collect a small payroll tax to maintain and

improve local infrastructure and services, including first responders, road maintenance, and parks.

dependent

dependent is a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency

exemption. Each dependency exemption decreases income subject to tax by the exemption amount. Dependents

are either a qualifying child or a qualifying relative of the taxpayer. The taxpayer's spouse cannot be claimed as a

dependent. Some examples of dependents include a child, stepchild, brother, sister, or parent.

taxable income

wages, salaries, bonuses, and tips, as well as investment income and various types of

unearned income. is the portion of your gross income that's actually subject to taxation…deductions

are subtracted from gross income to arrive at your amount of taxable income.

-Adjusted Gross Income

simply your total gross income minus specific deductions. Additionally, your Adjusted

Gross Income is the starting point for calculating your taxes and determining your eligibility for certain tax credits and

deductions that you can use to help you lower your overall tax bill. A measure of income used by the IRS to assess a

taxpayer's tax liability.

sales tax

United States are taxes placed on the sale or lease of goods and services in

the United States. Sales tax is governed at the state level and no national general sales tax

exists.

consumption tax on the sale of goods and services. A sales tax is usually charged

as a percentage of the retail cost at the point of purchase. Local and municipal governments

may charge their own sales tax, which is added to the state sales tax.

Property Tax

finance local governments (city/county) and public schools.

n ad valorem(based on

the assessed value of an item, such as

real estate or personal property) tax on

the value of a property. The tax is levied by

the governing authority of the jurisdiction

in which the property is located. This can

be a national government, a federated

state, a county or geographical region or a

municipality. Multiple jurisdictions may tax

the same property.

LUXURY TAX

surcharge levied only on certain

products or services that are deemed non-

essential or accessible only to the super-

wealthy. So-called "sin taxes" are imposed on

products like cigarettes and liquor and are paid

by every buyer, regardless of income. Anyone

who objects can just stop buying it. In

imposing the tax, the government is both

discouraging the use of these products and

raising revenue from those who keep buying

them.

a luxury tax might be imposed on

real estate transactions above $1 million, or

car purchases over $70,000.

ESTATE TAX

tax levied on the net value of the estate of a deceased person before distribution to the heirs.

CAPITAL GAINS TAXES

tax on profits realized on the sale of a

non-inventory asset. The most common

capital gains are realized from the sale of

stocks, bonds, precious metals, real

estate, and property.

INHERITANCE TAX

a tax paid by a person who inherits money

or property of a person who has died,

whereas an estate tax is a levy on the

estate of a person who has died.

1040ES

Estimated Tax for

Individuals

o Form1040-ES is used by

persons with income not

subject to tax

withholding to figure and

pay estimated tax.

1040

US Individual Income Tax

Return

o Annual income tax return

filed by most citizens or

residents of the United

States.

1099

Businesses are required to

issue a 1099 form to a

taxpayer (other than a

corporation--individual)

who has received at least

$600 or more in non-

employment income

during the tax year.

(DoorDash, Instacart)

Medicare

people 65 or older. You may be able to get

Medicare earlier if you have a disability, End-Stage Renal Disease

(permanent kidney failure requiring dialysis or a transplant), or ALS (also

called Lou Gehrig’s disease).

Medicare has four parts:

Part A (Hospital Insurance)

Part B (Medicare Insurance)

Part C (Medicare Advantage Plans

Part D (Drug Coverage)

Social Security

Social Security replaces a percentage of a worker's pre-retirement

income based on your lifetime earnings. The amount of your average

wages that Social Security retirement benefits replaces depends on

your earnings and when you choose to start benefits. Designed to

pay retired workers age 65 or older a continuing income after

retirement.

Unemployment compensation

paid by the state to unemployed

workers who have lost their jobs due to layoffs or retrenchment. It

is meant to provide a source of income for jobless workers until

they can find employment. In order to be eligible for

unemployment compensation, specific criteria must be satisfied,

such as having worked for a minimum stipulated period and actively

looking for a job. $125 - $504/week for up to 26 weeks…must

have worked at least 6 months, calculated by dividing the sum of

the wages earned during the highest quarter of the base period by

26, rounded down to the next lower whole dollar.