Taxes are what we pay for civilized society
- Slides: 26
“Taxes are what we pay for civilized society” Oliver Wendell Holmes Jr. , 1904
Taxes Fund Public Goods and Services Health Care for Elderly National Defense Social Services State and Local Police Public Education Financial Aid
The Power to Collect Taxes • American Revolution caused debt • Tax was necessary to pay debt • Article 1, Section 8 of the U. S. Constitution granted Congress power to tax
The Federal Government Dollar. Where It Comes From Social Security, Medicare, and Unemployment and other Retirement Taxes 36% Personal Income Taxes 43% Excise, Customs, Estate, Gift, and Miscellaneous Taxes 7% Borrowing to Cover Deficit 6% Corporate Income Taxes 13%
The Federal Government Dollar. Medicare, and Where It Goes other Retirement 32% Homeland Security 1% DOD Military 19% Social Security 21% Other 19% Net Interest on the Debt 7%
How Taxes Evolve House Ways and Means Committee Full House Senate Finance Committee Full Senate Joint Conference Committee Senate/House Compromise bill President vetoes bill Veto override fails Veto override passes President signs bill Tax law enacted
Voluntary Compliance Each person is responsible for filing a tax return.
Tax Avoidance versus Tax Evasion • Tax Evasion: Failure to pay legally due taxes • Tax Avoidance: Legal means of decreasing your tax bill
Taxpayer Rights • Information on taxpayer returns is private • Taxpayers have the right to appeal an IRS decision
“The income tax law is a lot of bunk. The government can’t collect legal taxes from illegal money. ” Al Capone
Congress has set a goal that 80% of all tax returns be filed electronically by this year (2007).
Chief Sources of Revenue
The Sixteenth Amendment
Voluntary Compliance • Keep necessary records • Report income accurately • Correctly calculate tax liability • File returns on time
Pay-As-You-Go Withholding • Taxes are paid as income is earned • Taxes are withheld based on Form W-4 information
Form W-2 • Shows how much employees earn • Copy must be attached to tax return
Financial Record Keeping
Financial Record Keeping Save: • Paycheck stubs • Bank statements • • Completed tax returns and forms Warranty information Receipts Credit card statements
Financial Record Keeping Store items in: • Envelopes or accordion file • Filing cabinets • Computer • Safety deposit boxes
Tax Liability
Three Methods of Tax Return Preparation • Electronically • Tax Preparation Software • Manually
Electronic Tax Preparation and Transmission
Methods of Electronic Tax Preparation and Transmission • Telefile • Personal Computer • Tax Professional
Refunds Money you get back from the government if you OVERPAID in taxes. We LOVE Refunds!!!!
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