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Taxes and Your Paycheck. Chapter 5. Payroll Taxes. Payroll Taxes are taxes based on the payroll of a business These taxes are paid to the government by you and your employer Payroll Taxes include income taxes and social security taxes. Income Taxes.

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payroll taxes
Payroll Taxes
  • Payroll Taxes are taxes based on the payroll of a business
  • These taxes are paid to the government by you and your employer
  • Payroll Taxes include income taxes and social security taxes.
income taxes
Income Taxes
  • Income Taxes are taxes you pay on most type of income you receive.
  • Income taxes are not a fixed percentage of income that all Americans.
  • The amount varies, depending on each taxpayer’s financial and family situation.
  • Some taxes on income support social programs.
virginia tax rates
Virginia Tax Rates


Not over $3,000, your tax is 2% of your Virginia taxable income.

but not your tax of excess

over— over— I s— over—

$ 3,000 $ 5,000 $ 60 + 3 % $ 3,000

$ 5,000 $ 17,000 $ 120 + 5 % $ 5,000

$ 17,000 $ 720 + 5.75 % $ 17,000


If your taxable income is $90,000, your tax is $720 + 5.75% of the amount over $17,000.

This equals $720 + (.0575 x $73,000) = $720 + $4,197.50 = $4,917.50 which should be rounded to $4,918.

  • Federal Insurance Contribution Act
  • The law that requires workers to contribute to social security and Medicare.
  • Your employer collects payroll taxes by deducting or withholding money from your wages.
  • Withholding enables the government to collect taxes at a steady rate, rather than at the end of the year.
  • Withholding also makes it more likely that people will pay their taxes.
your pay stub
Your pay stub
  • Your pay stub is always attached to your pay check
your pay stub1
Your pay Stub
  • Gross income is the amount you earn before taxes are withheld.
  • Net Income is the amount you receive after withholdings are subtracted from your gross pay.
form w 4
Form W-4
  • When you are hired your employer will ask you to complete federal form W-4.
  • Form W-4 provides the information your employer needs to determine the proper amount to withhold from your paycheck.
your responsibility for proper withholding
Your Responsibility for Proper Withholding
  • If the amount withheld from your paycheck during the year is not close to the total tax you owe, the Internal Revenue Service may fine you.
  • The Internal Revenue Service (IRS) is the federal agency that collects income taxes.
  • A worksheet provided with your W-4 tells you how to calculate the number of allowances you should claim.
  • An allowance is a number that reduces the amount of money withheld from your paycheck.
  • The larger the number of allowances you claim, the smaller the amount withheld.
  • How do you and other taxpayers benefit from the taxes you pay?
  • What are payroll taxes?
  • What is the purpose of Form W-4?
  • In what type of situations should you consider claiming extra allowances?
  • What is your main goal in determining how many allowances to claim?
your income tax return
Your Income Tax Return
  • A tax return is a set of forms that taxpayers use to calculate their tax obligation.
  • Income
    • Wages
    • Tips
    • Interest
sources of information for your tax return
Sources of Information for Your Tax Return
  • Form W-2
    • This form is a summary of your earnings and withholdings for the year for a job.
sources of information for your tax return1
Sources of Information for Your Tax Return
  • Form 1099-INT
    • This form is a statement of the interest your bank paid on your savings that year.
income tax forms
Income Tax Forms
  • Form 1040EZ
    • You must meet these criteria to use this form
fill out the 1040ez
Fill Out the 1040EZ
  • Identify Yourself
    • Social Security Number
  • Income
    • Your income today is $64,250.00
    • Your Taxable Interest is $148.35
  • Unemployment Compensation
    • This amount is $0.00
  • Adjusted Gross Income
    • Amount of all above added together
fill out the 1040ez1
Fill Out the 1040EZ
  • Determine Your Dedications
    • Yours is $9350 because you are single
  • Your Taxable Income
    • Adjusted Gross – Deductions
  • Federal Income Tax Withheld
    • $10,835
  • Did you get a refund?
  • What information do you need to complete a Form 1040EZ, and where does it come from?
  • What is the difference between adjusted gross income and taxable income?
  • Why should you check your work before filing your tax return?
taxes and government
Taxes and Government
  • Contributions to Social Security
    • Under FICA regulations, workers’ wages are taxed at a rate of 6.20%
    • This percentage is collected on gross income up to a maximum level that is adjusted each year.
    • In 1999 the maximum income taxable for social security was 72,800.
taxes and government cont
Taxes and Government Cont.
  • Contributions to Medicare
    • An additional 1.45%is taken on all earned income to pay for the Medicare program.
  • Your Employer’s Contribution
    • Employers match employees’ payments for social security and Medicare.
    • For each dollar you earn up to the maximum amount, 15.3 cents goes to the government for these taxes.
taxes and income
Taxes and Income
  • There are 3 ways taxes are based on share of income they take as people’s income change
    • Progressive Tax
      • Takes a larger share of income as the amount of income grows.
      • Someone who makes $25,000 would pay 15% while someone who made $350,000 would pay 39.6%
taxes and income1
Taxes and Income
  • Regressive taxes
    • These taxes take a smaller share of income as the amount of income grows.
      • Sales Tax
        • Joe 20,000 (pays 6% on 10,000 car) 3 percent of his income
        • Sally 50,000 (pays 6% on 10,000 car) 1.2 percent of her income
  • Proportional taxes
    • Takes the same share of all peoples taxes
      • No examples
how taxes are collected
How taxes are Collected
  • Direct
    • Taxes are paid directly to the government
  • Indirect
    • Taxes you pay that are included in the cost of a good
      • Landlords put property taxes in there rent
  • Pay-as-you-earn
    • Federal withholdings
types of taxes
Types of Taxes
  • Income Taxes
    • Most states and some cities have income taxes patterned after the federal system
      • Federal 15% to 39.6%
      • States less than 10%
  • Sales tax
    • Taxes added on to the price of goods and services at the time of purchase
  • Property taxes
    • Taxes on the value of real estate property.
types of taxes1
Types of Taxes
  • Excise taxes
    • Taxes on sale of specific goods and services.
    • Such as tobacco, gasoline, and alcoholic beverages, firearms, air travel
  • Estate and Gift Taxes
    • Taxes on property which will be received by those legally entitles to the estate.
    • Gift taxes are taxes that may be paid by the giver of gifts worth more than 10,000
types of taxes2
Types of Taxes
  • Business and License Tax
    • To operate certain kinds of business, companies, individuals have to have license, permit, or stamp
    • These taxes are paid for these certifications
  • Customs Duties and Tariffs
    • To control the flow of products that are imported into this US.
    • This sometimes results in items from abroad being sold at higher prices.
  • What is the largest source of federal government revenue?
  • Which governments benefit from sales taxes?
  • What are the principals of taxation?
  • What is the difference between sales and excise taxes?
tax cuts
Tax Cuts
  • Lower taxes encourage consumers to make beneficial choices.
  • New York eliminated sales taxes on certain products for short periods of time to encourage consumer spending to improve the economy
  • Many local governments in areas with high unemployment reduce property taxes for businesses that operate there.
  • If you contribute to a charity, the government may allow you to deduct your contribution from your adjusted gross income.
  • This tax break influences many people to give more to charities.
what state and local governments provide
What State and Local Governments Provide
  • Buildings and maintaining local roads
  • Operating police and fire protection
  • Maintaining a criminal justice system
  • Building and staffing public schools
  • Building and operating state colleges and university
no sales tax states
No Sales Tax States
  • Sales taxes in the United States are assessed by every state except Alaska, Delaware, Montana, New Hampshire and Oregon. Hawaii has a similar tax although it is charged to businesses instead of consumers.
no income tax states
No Income Tax States
  • Seven states have no state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two others, New Hampshire and Tennessee, tax only dividend and interest income.
best and worst states for taxes
Best and Worst States for Taxes
  • Even if you live in the most heavily taxed state, Maine (which collects an average of 13.5% of residents' income), you might not be ready to high-tail it to Alaska, the state with the lowest taxes (6.6%, and the only state that lacks both sales and income taxes), unless you have an affinity for mosquitoes and seemingly endless tundra.