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Jessica Cox – General Financial Literacy

• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming

What do these states

have in common?
• A tax is a mandatory payment made by an individual or
organization to government to pay for public needs.
• Federal, state, and local taxes account for more than 35%
of the average families expenses.
• For many workers, taxes are their largest single annual
expense, even more than food, shelter, transportation,
education, medical care, or recreation.

What are Taxes:

• The average person works about 2 hours out of every 8
hours on the job to pay for the government.
• Each year employed persons work from January to May
just to pay federal, state, and local taxes.

What are Taxes:

• The amount that is deducted from your paycheck for
federal and state income taxes depends on two things:
• The amount you earn
• The number of exemptions you elect on your Form W-4
(withholding form)

• Taxes pay for national defense, social insurance, schools,
highways, airports, parks, fire and police protection,
health care, interest on national debt, and law
• What would happen if we didn’t have these services?

What do Taxes Pay For:

• Personal Income Tax
• Social Security Tax
• Property Tax
• Sales Tax
• Excise Tax

Five Types of Taxes:

• Tax on the amount of money you can earn.

Personal Income Tax:

• Also on personal income used to pay social security
programs administered by federal government.

Social Security Tax:

• Tax on the value of your property and real estate a person
owns. It may include houses, land, cars, boat, home
furnishings, and expensive jewelry. Property taxes are
assessed by city, county, and/or state government.

Property Tax:
• Tax on sales and goods you pay at time of purchase.

Sales Tax:
• Tax placed on certain products or services, such as
gasoline, cigarettes, liquor, and telephone services.

Excise Tax:
• You need to file taxes if your gross income is equal to or
exceeds $5,800.

When to File Taxes:

• Gross Income:
• Net Income:

Different Types of Income:

• An individuals total personal income, before accounting
for taxes or deductions.
• Sources of gross income include salary, wages, tips,
capital gains, dividends, interest, rents, pensions, and

Gross Income:
• Net income is gross income minus taxes, allowances, and
deductions. An individual’s net income is used to
determine how much income tax is owed.

Net Income:
• What is a W-4?
• An employee completes an IRS W-4 form, to indicate his
tax situation to the employer the correct amount of tax to
withhold from an employee’s paycheck based on the
employee’s marital status, number of exemptions and
dependents and other factors.
• You can claim an exemption for yourself unless someone
else can claim you as a dependent.

W-4: Employee’s Withholding

Allowance Certificate
• The total number of allowances tells your employer how
much tax to take from your paycheck.
• The lower the number the higher amount the more taxes
the employer will take.

W-4: Employee’s Withholding

Allowance Certificate
• The W-2 form reports an employee’s annual wages and
the amount of taxes withheld from his or her paychecks.
• You will receive your W-2 by January 31st, you will
receive them from every employer you worked for the
previous year.
• This form is what you use to complete your taxes by
April 15th.

• This statement shows how much money you earned, how
much was withheld and sent to the respective government
agencies in your behalf.

• 1040 EZ
• 1040 A
• 1040

Tax Forms:
• Social Security is intended to provide you with
subsistence level of income in retirement to provide for
basic necessities such as food, shelter, and clothing.
• It is not intended to be your sole source of income.
• If you were born before 1943 you are eligible to collect full
social security benefits at age 65.
• If you were born in or after 1960 you have to wait until the age
67 to claim your benefits.

Social Security and Medicare:

• In addition to paying for retirement your social security
taxes are also provide for disability insurance for you,
survivor income insurance for you financial dependents,
and Medicare, the health insurance program for retirees.
• The amount of social security benefits that you receive in
retirement depends on your average earnings during your
working years.
• A misconception about social security is that what you
put in, you will eventually receive back. Is this true?

Social Security and Medicare:

• This is the core of most retired person’s medical
• Two parts to Medicare:
• Part A: pays for costs of a hospital stay
• Part B: is optional insurance plan to pay doctors bills.
Participants pay a monthly premium which is automatically
deducted from their monthly social security checks.

Social Security and Medicare: