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CHAPTER051.pptECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
WHAT’S AHEAD
5.1 Taxes and Your Paycheck
5.2 File a Tax Return
5.3 Taxes and Government
5.4 Government Spending
Economic Education for Consumers
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CHAPTER 5
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ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
LESSON 5.1
Taxes and Your Paycheck
GOAL
Describe payroll taxes and factors that determine withholding.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
KEY TERMS
payroll tax
income tax
Federal Insurance Contributions Act (FICA)
withholding
gross income
net income
Form W-4
Internal Revenue Service (IRS)
allowance
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Payroll Taxes
Income taxes
FICA, or contributions to Social Security and Medicare
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Withholding
Your paycheck stub
Gross income
Net income
Form W-4
Your responsibility for proper withholding
Allowances
Adjusting your allowance
Overwithholding as a way to save
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
What are payroll taxes and how is the amount that is withheld from income determined?
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
What are payroll taxes and how is the amount that is withheld from income determined?
Payroll taxes are calculated according to income as it is earned and paid by employee, employers, or both.
The amount that is withheld is based on the employee’s level of income and information provided on the W-4 form completed by the employee.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
LESSON 5.2
File a Tax Return
GOALS
Identify sources of information you need to complete your income tax return.
Complete a federal Form 1040EZ.
Describe how taxes differ for a self-employed person versus an employee.
Explain why more than half of individual income tax returns are filed online.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
KEY TERMS
tax return
Form W-2
Form 1099-INT
Form 1040EZ
dependent
deduction
Social Security number
taxable income
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Your Income Tax Return
A tax return is a set of forms that taxpayers use to calculate their tax obligation.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Sources of Information
for Your Tax Return
Form W-2
Form 1099-INT
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Income Tax Forms
Form 1040EZ
Form 1040A or 1040
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
How to Complete a 1040EZ
Identify yourself
Income
Payments and tax
Refund
Amount you owe
Sign
Check for accuracy and file your return
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Self-Employment Tax
Paying on a quarterly basis
Schedule C (1040)
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Electronic Filing
Advantages of electronic filing
Shorter processing time
Faster refund
Filing options
IRS web site
Tax preparation software
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
What tax information is provided to you by your employer and your bank?
What information do you need to calculate the amount of additional tax you owe or refund that is owed to you using a Form 1040EZ?
What are the differences in the way traditional employees and self-employed people pay their taxes?
How can you file your tax return online? What is the advantage of filing online?
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
What tax information is provided to you by your employer and your bank?
Employers provide Forms W-2, which summarize earnings and withholdings.
Banks provide Forms 1099-INT, which summarize interest income.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
What information do you need to calculate the amount of additional tax you owe or refund that is owed to you using a Form 1040EZ?
Amount of your earned income
Interest income
Income tax withholdings
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
What are the differences in the way traditional employees and self-employed people pay their taxes?
Taxpayers who work for an employer have their taxes deducted each pay period.
Self-employed taxpayers calculate the amount of tax they owe each quarter and pay that amount to the government.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
How can you file your tax return online? What is the advantage of filing online?
Use your tax preparation software to enter your tax information electronically or pay a tax service to do it for you.
Online filing generally allows you to get your tax refund faster.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
LESSON 5.3
Taxes and Government
GOALS
Describe where the federal government gets the money it spends.
Explain principles and types of taxation.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
KEY TERMS
Sales tax
Property tax
Excise tax
Estate tax
Gift tax
Business or license tax
Customs duty or tariff
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Sources of Federal Government Income for 2006
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© 2010 South-Western, Cengage Learning
Personal income taxes
39%
Excise, customs, estate, gift, and miscellaneous taxes
7%
Corporate income taxes
13%
Social Security, Medicare, and unemployment and other retirement taxes
32%
Borrowing to cover deficit
9%
© 2010 South-Western, Cengage Learning
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ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Social Security and Medicare
Contributions to Social Security
Contributions to Medicare
Your employer’s contribution
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Principles of Taxation
Benefit principle
Ability-to-pay principle
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Taxes and Income
Progressive taxes
Regressive taxes
Proportional taxes
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
How Taxes Are Collected
Direct taxes
Indirect taxes
Pay-as-you-earn taxes
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Types of Taxes
Income taxes
Sales taxes
Property taxes
Excise taxes
Estate and gift taxes
Business and license taxes
Customs duties and tariffs
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
What are the major sources of revenue for the federal government?
What is the main difference between state or local taxes and federal income taxes?
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
What are the major sources of revenue for the federal government?
Personal income taxes
Social Security and Medicare taxes
Corporate income taxes
Borrowing
Other taxes that include excise, customs, estate, gift, and miscellaneous taxes
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
What is the main difference between state or local taxes and federal income taxes?
Federal taxes take a larger percentage of consumers’ income than do state and local taxes.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
LESSON 5.4
Government Spending
GOALS
Identify how taxes can influence consumer decisions.
Explain how the government spends the money it receives.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
KEY TERM
public good
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
The Power to Influence
“Sin” taxes
Tax cuts
Charities
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Government Spending
Social Security, Medicare, and other retirement
Social programs
National defense, veterans, and foreign affairs
Physical, human, and community development
Net interest on the debt
Law enforcement and general government
Debt reduction
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
© 2010 South-Western, Cengage Learning
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23% National defense, veterans, and foreign affairs
8% Net interest on the debt
12% Physical, human, and community development
19% Social programs
2% Law enforcement and general government
36% Social Security, Medicare, and other retirement
© 2010 South-Western, Cengage Learning
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ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Examples of What State and Local Governments Provide
Building and maintaining roads
Operating police and fire protection services
Maintaining a criminal justice system
Building and staffing schools
Building and operating state colleges and universities
Supporting medical facilities
Constructing and operating sewage treatment plants
Operating unemployment compensation programs
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
How can taxes influence your buying decisions? How can your local government use taxes to help local workers?
Describe the categories of federal government spending. What types account for the largest part of the total?
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
How can taxes influence your buying decisions? How can your local government use taxes to help local workers?
Taxes influence buying decisions by raising or lowering prices.
Local governments can lure businesses to an area by offering lower taxes to businesses willing to locate there.
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 5
Describe the categories of federal government spending. What types account for the largest part of the total?
Types of federal spending include Social Security, Medicare and other retirement programs; social programs; national defense; physical, human, and community development; law enforcement; and payments of interest on the national debt.
More than half of total federal spending goes for Social Security/Medicare (36%) and for national defense (23%).
© 2010 South-Western, Cengage Learning
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© 2010 South-Western, Cengage Learning
Economic Education for Consumers
Economic Education for Consumers
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CHAPTER 5
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CHAPTER 5
