Consumer Taxation

CONSUMER TAXATIONIntroduction to Business & Marketing

LEARNING OBJECTIVES Understand taxes and payroll

deductions Identify the major types of

consumer taxation. Compute gross and net pay. Complete personal income tax

forms.

WHAT ARE TAXES

A sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc.

TYPES OF CONSUMER TAXATION

PERSONAL PROPERTY TAX State mandated tax requiring the

owner to pay a percentage on the value of their property Homes Cars Recreational Vehicles

Main tax supporting public education, emergency services, and local government

INCOME TAX

Requires workers to pay a percentage of their earned income

Imposed by the federal government and by most state & local governments

Amount paid depends on your tax bracket

SALES TAX Consumption tax

charged at the point of purchase for certain goods & services

Each state or jurisdiction can set its own sales tax percentage

SALES TAX EXAMPLES

Virginia – 5%

Tennessee – 9%

Oregon – 0%

Delaware – 0%

California – 11%

FICA Federal Insurance Contribution

Act

Payroll deductions paid by individuals Social Security - 12.4% Medicare – 2.9%

If you are a wage or salary employee your employer pays half

Self employed – you pay all

UNDERSTANDING YOUR PAYCHECK

WHEN YOU GET PAID… Gross Pay: wages & salary Deductions : federal taxes,

state taxes, FICA, and other optional deductions Optional deductions include

things like health insurance, retirement, etc.

Net Pay: take-home pay Calculated by subtracting

deductions from gross pay

IN YOUR NOTES Look over the paystub provided. Circle & label the employee’s gross pay. Draw a rectangle around all the deductions for

this paycheck. Circle the employee’s net pay for this paycheck. How much did the employee pay in taxes? What percentage of the employee’s gross pay

went toward taxes?

INCOME FORMS

FORM W-4 Completed every time you

start a new job Determines how much you

will pay in taxes each paycheck

If you claim zero, the highest amount of taxes will be withheld from your paycheck.

FORM W-2

Federal tax form issued by employers that states how much an employee was paid in a given year

Used to complete tax return

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FORMS FOR FILING TAXES

TAX FORMS

1040 EZ 1040AUse this form if… Income is less than

$100,000 Filing as single or

married Under age of 65 No dependents

Use this form if…Income is less

than $100,000Claiming

adjustments for student loan interest

MORE TAX FORMS

1040 1099Use this form

if… Income exceeds

or equals $100,000

Self-employed

Used to report taxable income, such as interest, dividends, stock sales, etc.

WAYS TO FILE YOUR TAXES

FILING YOUR TAX RETURN In the past, you would prepare your taxes

and send your complete package in to the Internal Revenue Service (IRS)

Most people now use TurboTax, or another online tax service, to prepare their taxes and then e-file online with the IRS

You can also hire an accountant

TAX FORM ACTIVITY

http://apps.irs.gov/app/understandingTaxes/student/simulations.jsp

Go to the link provided and complete the simulations listed below Simulation 1 – Lawrence Red Owl Simulation 2 – Cicely King Simulation 3 – Tasha Miller Simulation 7A – Monica Lindo