UT - Understanding Taxes Module Overview

Understanding Taxes Module Overview

Introduction

 What do Martha Stewart, Lauryn Hill, Pamela Anderson, Lindsay Lohan and Khloe Kardashian all have in common? They are all celebrities that were sought after by the IRS for allegedly not paying their taxes at one point in their career. In this module, you will learn about the history of taxes in the U.S., the different types of taxes in the U.S., how to determine how much tax you must pay, and discover how to calculate your federal taxes and file a tax return. Reporting your income to the Internal Revenue Service is required, so dive into the content and get started right away to avoid financial trouble like these ladies!

 

Essential Questions

  • Why do we need taxes?
  • What are the types of taxes in the US?
  • How do taxes affect your pay?
  • How are income taxes calculated?
  • How is taxable income calculated?
  • How do you prepare tax return form 1040?
  • Why do some individuals get tax returns and some individuals have to pay taxes at the end of the year?

 

Key Terms

  • income taxes: percentage of your income, including wages, salaries, commissions and bonuses paid to the government each year
  • taxes: fees charged by the government on products, activities or income
  • progressive tax: a tax that takes a larger percentage of income from high-income groups than from low-income groups
  • proportional tax: a tax that takes the same percentage of income from all income groups
  • regressive tax: a tax that takes a larger percentage of income from low-income groups than from high-income groups
  • payroll taxes: include Social Security and Medicare taxes
  • exemption: amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions; personal and dependency. Each exemption reduces the income subject to tax
  • standard deduction: reduces the income subject to tax and varies depending on filing status, age, blindness, and dependency
  • adjusted gross income: total income reduced by certain amounts, such as for an IRA or student loan interest
  • refund: money owed to taxpayers when their total tax payments are greater than the total tax liability. Refunds are received from the government
  • dependent: a person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption
  • Internal Revenue Service (IRS): government agency that collects taxes for the U.S. government
  • tax evasion: a failure to pay or a deliberate underpayment of taxes
  • tax exemption: a part of a person's income on which no tax is imposed
  • tax liability (or total tax bill): the amount of tax that must be paid
  • tax credit: a dollar-for-dollar reduction in the tax. Can be deducted directly from taxes owed

 

I[CC BY-NC-SA 4.0] UNLESS OTHERWISE NOTED | IMAGES: LICENSED AND USED ACCORDING TO TERMS OF SUBSCRIPTION - INTENDED ONLY FOR USE WITHIN THE LESSON.