Finance assignment ASPS
mk59
finslides_2.pptx1
Let’s discuss…
Insurance
Taxes
1
12/4/2014
2
Insurance
2
12/4/2014
“If you need it, you know you’ve had a bad day.”
What is it?
Why is it necessary?
How does it work?
Coverage
Premium
Deductible
Funding to pay claims
Insurance
3
3
Death insurance?
Primary goal: income replacement
Term, Cash Value, Return of Premium
Buy term life and invest the difference
Premiums influenced by age and health
Do you need it?
Life Insurance
4
4
More of an investment than insurance
Fixed, Variable, Immediate, Deferred
Surrender charges, fees and expenses
Tax-deferred income growth
Taxed at ordinary income rates
Most people are better off investing in mutual funds
See “Annuity Rules to Remember” on page 204
Annuities
5
5
Required if you have a mortgage
Relatively inexpensive
Actual cash value vs. replacement cost
Take inventory of its contents (personal property)
Endorsements, or “riders” for special items (e.g., jewelry, computers, DVD’s)
Can pay an extra premium to insure/list specific personal property items
How much insurance do you need?
Use it and lose it!
Homeowner’s Insurance
6
6
Renter’s insurance
Similar to homeowner’s insurance, but doesn’t cover the building
Relatively inexpensive
Actual cash value vs. replacement cost
Take inventory
Endorsements, or “riders” for special items (e.g., jewelry, computers, DVD’s)
Can pay an extra premium to insure/list specific personal property items
Home warranty
Repairs and equipment/appliance replacements
Similar “Coverages” Related to “Home”
7
7
Required by state law
Each state requires different coverage levels
Types of coverage
Liability
Comprehensive
Collision
Uninsured/under-insured motorists
Medical
Personal injury protection (PIP)
Can pick your coverage limits (considering state laws)
Collision & Comprehensive required if you have a vehicle loan
Automobile Insurance
8
8
Why does good credit = lower premiums?
Don’t file small claims or excessive claims
Know the ways to decrease insurance premiums
Pages 218-220
Multiple policies
Can your grades influence insurance rates?
What are some other cost saving methods you know of?
Insurance Ideas to Consider
9
9
10
Taxes
10
12/4/2014
Socialism - an economic system in which the means of production are commonly owned and controlled cooperatively; or a political philosophy advocating such a system.
Social Democracy - advocate public control of capital within the framework of a market economy
Which are we in the U.S.?
Taxes: Necessary evil?
Taxes
11
11
Payroll deductions (come out of your paycheck)
Social Security and Medicare
Federal, State and Local Income Taxes
Pay throughout year
Liability based on income
Tax bills and refunds
W-4 form
Required at any job
Determines how much tax will be withheld
Websites to help determine payroll deductions (e.g., PaycheckCity.com)
W-2 form
Summary of year’s earnings and withholdings
Compare to last paycheck of the year for each employer for accuracy
Payroll Taxes
12
12
Standard deductions vs. itemized deductions
Marginal tax rate vs. effective tax rate
Exemptions
Withholding tax table (see IRS Publication 15 for current tables)
Federal Income Taxes
13
If your taxable earnings are $35,000, how much U.S. income tax would be withheld from you paycheck? What’s your marginal tax rate? Your effective tax rate?
In-class sample calculation:
U.S. tax withholding = 907.50 + 0.15(35,000-11,325) = $4,458.75
Marginal tax rate = rate on last dollar earned = 15%
Effective tax rate = average tax rate = withholdings / taxable earnings = 4,458.75/35,000 = 0.1274 or 12.74%
Similar calculations could apply to payroll withholding or end-of-year tax calculations.
13
State income tax rates
% of income or % of federal withholding
In Arizona, can deduct sale taxes on U.S. return instead of state income taxes, but must choose
Income Taxes
14
14
Not all income is taxable!
What are some exceptions?
Underwithholding vs. overwithholding
There are ways to decrease your tax bill
Pre-tax contributions (401(k), HSA)
IRA contributions
Donations (deduction or credit)
Mortgage interest
Investment expenses
Home based business expenses
Tax Credits vs. Tax Deductions
Deductions reduce your income
Credits reduce your total taxes due
Tax Issues to Consider
15
15
Proper tax reporting is on an honor system
Correspondence vs. in-person
Tips for Audits
Keep good records
Know your rights
Understand/explain your reasons for deductions
Be cordial – auditors are people, too
Audits are mainly based on anomalies/outliers
Look for return info that is outside of typical patterns
TurboTax reviews tax returns for audit alerts
IRS (and Other) Audits
16
16
17
Article: “Nobody Ever Said ‘Taxes’ Was an Easy Subject: 12 Basic Tax Lessons” http :// www.bankrate.com/finance/money-guides/13-basic-tax-lessons-8-117475-1.aspx
IRS, www.irs.gov
Guidelines for U.S. withholding of employee income taxes, Social Security and Medicare Employer’s Tax Guide, IRS Publication 15 http:// www.irs.gov/pub/irs-pdf/p15.pdf
Federal Tax Tables for individuals’ annual income taxes http :// www.irs.gov/pub/irs-pdf/i1040tt.pdf
Your Income Taxes for Individuals, IRS Publication 17 http :// www.irs.gov/pub/irs-pdf/p17.pdf
State tax agencies
Arizona Department of Revenue, http ://www.azdor.gov /
Tax Information Resources
12/4/2014
17
Coming Events
Homework & Assignment
Due no later than 12 noon Monday, November 17
Parrino Questions & Problems – Chapter 9
Online through WileyPLUS via BbLearn
Due no later than 2:00 pm Monday, November 17
WSJ Assignment #4 (25 points possible)
WSJ Assignment #5 (25 points possible)
Via Support Services with label and date-time stamp
Upcoming Class Sessions
Wed., Nov. 19: Capital Budgeting Cash Flows (Parrino chapter 10)
Thurs., Nov. 20: Supplemental Session – RESCHEDULED to December 4
Wed., Nov. 25: Night Before Thanksgiving – NO CLASS – Enjoy, be safe!
Wed., Dec. 3: Cost of Capital (Parrino chapter 11) & Final Exam Prep
Thurs., Dec. 4: Supplemental Session (optional), 5:30-8:00 pm, Room 226
18
Since Nov. 25 is the night before Thanksgiving, we will not meet. Travel safely and enjoy your Thanksgiving holiday!
An optional supplemental session has been scheduled to help because of missing a week.
It was originally scheduled for Thurs., Nov. 20, but has been moved to Thurs., Dec. 4.
It will be from 5:30-8:00 pm in our regular room.
We will review capital budgeting and cost of capital and work on Pre-Exam “In-Class” Assignment #3.
18
Return Graded Materials
Exam 2
Graded assignments
WSJ Assignment #3
International Finance Module Assignment
Pre-Exam “In-Class” Assignment #2
19
19
a) SINGLE person (including head of household)—
If the amount of wages (after subtracting withholding
allowances) is:
The amount of income tax to withhold is:
Not over $2,250........ $0
Over— But not over— of excess over—
$2,250 —$11,325 .. $0.00 plus 10% —$2,250
$11,325 —$39,150 .. $907.50 plus 15% —$11,325
$39,150 —$91,600 .. $5,081.25 plus 25% —$39,150
$91,600 —$188,600 .. $18,193.75 plus 28% —$91,600
$188,600 —$407,350 .. $45,353.75 plus 33% —$188,600
$407,350 —$409,000 .. $117,541.25 plus 35% —$407,350
