U.S. Tax Class Handout (v2)

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1 U.S. Tax Class Handut (v2) Slide 1 US Taxes fr the Faint f Heart Gary Kenig (GKenig@OpenFur.cm) AARP Tax-Aide Cunselr (10 years) and Trainer with 45 years tax preparatin experience February 10, 2015 Slide 2 Presentatin Frmat & Cntent Interactive Attendee Participatin Questins welcmed thrughut Parking Lt fr later answers Fcus n US Taxes (since TX desn t have state incme tax) Purpse T share infrmatin abut preparing yur taxes fr thse wh haven t taken primary respnsibility in the past Slide 3 Questins Hw many f yu Have allwed smene else t take primary respnsibility? Have taken primary respnsibility fr filing yur family s taxes? Have angst at tax time? Are fearful f being audited by the IRS? Have been audited by the IRS? Are filing using paper frms rather than using sftware? Slide 4 Nt Rcket Science! Slide 5 What is yur Filing Status? Determined at end f tax year Single never married, divrced, widw(er), nrmally with n dependent children Married filing Jintly married and living tgether fr last half f year (r recently married) Married filing Separately married but chsing t file as separate individuals Nrmally nt recmmended but fr the rarest f circumstances Nrmally nly dne if it results in lwer taxes fr the cuple cmbined, r if there is a need t divrce the financial activities f ne spuse frm the ther Head f Husehld Single but with dependents Qualifying Widw(er) with Dependent Children Slides 6-8 Rules fr Filing US Taxes Wh is Required t file? Filing Status EY Grss Incme Single <65 $10, $11,700 Married <65 * 2 $20,300 Filing <65 & 65+ $21,500 Jintly 65+ * 2 $22,700 Married filing Separate $3,950 Head f <65 $13,050 Husehld 65+ $14,600 Qualifying Widw(er) <65 $16,350 w/ Dependent Children 65+ $17,550

2 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 $55,000 $60,000 $65,000 $70,000 $75,000 $80,000 $85,000 $90,000 $95,000 $100,000 $125,000 $150,000 $175,000 $200,000 $225,000 $250,000 $275,000 $300,000 $400,000 $500,000 $600,000 Tax Rate Filing Threshld is based upn Filing Status Incme threshld is Grss incme Age 65 is the nly Age demarcatin pint January 1 st birthdays Wh Shuld file? Anyne with taxes withheld that deserves a refund Anyne eligible fr a refundable tax credit Everyne t help stp the Bad Guys File frm with IRS if victim f Identity Theft Will receive PIN annually frm IRS fr filing Slides 9-10 Truth abut Tax Brackets What are tax brackets? Will yu pay that much in tax? Tax brackets affect yur marginal incme (and deductins) nly Tax brackets are based upn taxable incme, nt grss incme Taxable vs. Grss will be explained later Slides 11 & 12 Effective Tax Rate (based upn Grss Incme) Table Graph 40.0% 2014 Effective Tax Rate Based Upn Grss Incme 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% Eff. Rate Eff. Rate Eff. Rate Eff. Rate 0.0%

3 Slide 13 What is Incme? All wrldwide incme Wages Interest Dividends Taxable refunds previusly deducted n prir year returns Alimny received Business incme (r lss) Capital gains (r lss) IRA distributins (nt Rth IRAs unless early withdrawal exceeding cntributins) Pensins and Annuities Rental incme Ryalties Partnership incme (r lss) Trust incme Farm incme (r lss) Unemplyment cmpensatin Scial Security / Railrad Retirement benefits Other miscellaneus incme (e.g. gambling winnings, jury duty, etc.) Slide 14 Incme Classificatins Grss Incme All yur wrldwide incme (including certain lsses) Adjusted Grss Incme (AGI) Grss incme minus allwable adjustments Mdified Adjusted Grss Incme (MAGI) AGI with adjustment added back fr certain special circumstances Different MAGIs fr different tax frms Active Incme Incme yu are invlved with earning Passive Incme Incme yu derive withut activity n yur part (e.g. interest, ryalties, etc.) Taxable Incme Adjusted Grss Incme minus Deductins and Exemptins Slide 15 Deductins Deductins Standard r Itemized Standard Deductin Granted in lieu f itemizing deductins Different amunts fr Single, Married filing Jintly, Married filing Separately, Head f Husehld, and Qualifying Widw(er) Itemized Deductin Medical expenses including insurance premiums and mileage (w/ exclusin) Nn-federal taxes paid Mrtgage interest, pints, and insurance (PMI) Investment interest Gifts t charity by cash and nn-cash, including travel expenses Other deductins (casualty and theft lsses, unreimbursed emplyee expenses, tax preparatin fees, safety depsit bxes hlding investments, etc.) w/ exclusin

4 Slide 16 Standard Deductin & Exemptin Amunts Standard Deductin: Single / Married filing Separately $6,200 Head f Husehld $9,100 Married filing Jintly $12,400 Exemptins/persn $3,950 Slide 17 Caveats Wh determines what is taxed, nt taxed, hw much? Cngress Wh cllects the taxes wed? IRS Dn t sht the messenger If yu dn t like the taxes yu pay, wh d yu cntact? Yur US Representative, nt yur US Senatr All tax bills begin in the Huse Slides Tax Frms 1040EZ 1040A Pages 1 & Pages 1 & 2 Slide by Sectin Getting Started Name (as shwn n yur scial security card(s)) Scial Security number(s) Address Presidential Electin Campaign designatin ($3 fr taxpayer and/r spuse) Filing Status (S, MFJ, MFS, HH, QW w/ DC) Dependents (Name, SSN, Relatinship, CTC) Slide 24 Incme Wages Interest Dividends Taxable Refunds Alimny (received) Business incme / lss (if self-emplyed) Capital gain / lss (including prir-year lss carryver) IRA distributins Pensins and annuities Rental real estate, Ryalty, Partnerships, S-Crpratins, Trusts, etc. Farm incme / lss Unemplyment cmpensatin Scial Security / Railrad Retirement benefits Miscellaneus incme (Gambling winnings, Jury duty, freign incme exclusin, etc.)

5 Slide 25 Adjustments t Incme Educatr expenses Certain business expenses f reservists, artists, fee-based gvernment fficials) Health Savings Accunt (HSA) deductin Mving expense (business related) Deductible prtin f Self-Emplyment tax Self-emplyed SEP, SIMPLE, and qualified plans Self-emplyed health insurance deductin Penalty n early withdrawal f savings Alimny (paid) IRA deductin Student lan interest deductin Tuitin and fees deductin Other (Jury Duty pay given t emplyer, whistle-blwer fees, etc.) Slide 26 Deductins / Exemptins / Tax Deductin classificatins Over 65 taxpayer / spuse Blind taxpayer / spuse Standard deductins fr 2014 Single / Married filing Separately - $6,200 Head f Husehld - $9,100 Married Filing Jintly - $12,400 Itemized deductins Identified later Exemptins fr 2014 $3,950 per persn (taxpayer, spuse, dependents) Taxable Incme Tax Tax table (<$100,000) r schedule (>$100,000) Schedule D tax wrksheet Freign earned incme tax wrksheet Alternative Minimum Tax (AMT) Freign Tax Credit (pssibly frm brkerage statement) Child / Dependent care expenses Educatin credits Retirement savings cntributin credit (<$30,000 incme) Child Tax Credit (maximum f $1000 per child) Residential Energy credits

6 Incme $3,000 $6,000 $9,000 $12,000 $15,000 $18,000 $21,000 $24,000 $27,000 $30,000 $33,000 $36,000 $39,000 $42,000 $45,000 $48,000 $51,000 Credit Slide 27 Other Taxes & Payments Self-Emplyment Tax Scial Security / Medicare Tax Additinal tax n IRAs and ther qualified retirement plans Husehld emplyment taxes Health care Individual respnsibility (new fr 2014) Taxes frm special frms Federal incme tax withheld (withheld by payer) Estimated tax payments (submitted quarterly) Earned incme credit (slide 17A EITC graph) Additinal tax credit (balance nt withheld abve due t tax liability) American Opprtunity Credit (fr pst-secndary educatin expenses) Net Premium Tax Credit fr ACA (new fr 2014) Amunt paid with Request fr Extensin Excess Scial Security and Tier 1 RRTA withheld (multiple emplyers) Credit fr Federal tax n fuels Other credits Slide 28 Earned Incme Tax Credit Single / Married (0-3 Children) $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Earned Incme Tax Credit S-0 S-1 S-2 S-3 M-0 M-1 M-2 M-3 Slide 29 Final Truth / Signature Amunt verpaid Amunt t be refunded (why can be different) Direct depsit (up t three accunts, including savings bnds) Amunt t be applied t 2015 taxes Amunt yu we Estimated tax penalty (recmmend always leaving blank, let the IRS tell yu) 3 rd party designee fr ne-year with a designated 5-digit pin Taxpayer (and spuse) signature(s), dates, ccupatin(s), daytime phne number & PIN received frm IRS if a victim f Identity Theft Preparer s Infrmatin (if paid) and EIN (if paid) r SIDN (if unpaid)

7 Slide 30 Frm 1040 Schedule A Itemized Deductins Slide 31 Itemized Deductins Medical / Taxes Medical and Dental Expenses Taxes Yu Paid Slide 32 Itemized Deductins Interest / Gifts Interest Yu Paid Gifts t Charity Slide 33 Itemized Deductins Casualty / Misc. Casualty and Theft Lses Jb Expenses and Certain Miscellaneus Deductins Other Miscellaneus Deductins Ttal Itemized Deductins Slides What t bring and save fr tax preparatin (Preferably in this sequence) Scial security cards fr all persns listed n tax return Picture id(s) fr taxpayer and spuse Prir year s tax return Blank check shwing ruting number and accunt number (if autmatic depsit r withdrawal f refund r payment due) Prir year s tax return W-2s (fr wages) 1099-Int, 1099-Div, 1099-G (if state r ther nn-federal tax refund) 1099-Misc (if self-emplyed), and crrespnding expenses including autmbile dcumentatin (purchase date, mileage fr business, cmmuting, and persnal), and ther self-emplyed expenses 1099-B (brkerage statement, which may cntain 1099-Int and 1099-Div embedded) 1099-R (pensins and annuities) Schedule K-1 r ther infrmatin related t partnership, S-Crp, trust incme r rental and ryalty incme W2G (fr unemplyment cmpensatin) 1099-SSA (fr scial security incme) r RRB-1099 fr railrad retirement incme W-2G (fr gambling winnings) Educatr expense dcumentatin Health Savings Accunt dcumentatin Mving expense dcumentatin Self-emplyed dcumentatin nt included abve IRA deductin dcumentatin Student lan dcumentatin Tuitin and fees dcumentatin fr pst-secndary educatin 1095-A, 1095-B, and 1095-C (frm Marketplace, Insurance Cmpany, and Emplyer, respectively) Medical expenses including insurance payments, LTC insurance, dctr, hspital, and prescriptin payments, and mileage fr all medical care Sales tax payments fr majr purchases (aut, bat, plane, etc.) Real estate tax payments

8 Hme mrtgage interest, pints, mrtgage insurance premiums and certain current-year clsing csts Charitable cntributins (bth cash and nn-cash) and mileage fr charitable activities Casualty r Theft lss dcumentatin Unreimbursed emplyee expenses fr travel, unin dues, jb educatin, etc. Previus year tax preparatin fees Investment expenses including safety depsit bx fees Slide 38 Finis Updated handut t Emeritus later tday Review any remaining Parking Lt Questins Additinal Questins P.S. Wuld anyne want a class n Dentn Cunty Prperty Taxes?

Print this article. Check things off as you collect them, and enter information such as Social Security numbers and cash amounts.

Print this article. Check things off as you collect them, and enter information such as Social Security numbers and cash amounts. Checklist fr Preparing Yur Incme Tax Return Use the fllwing detailed checklist t gather infrmatin fr preparing yur incme tax return. Nt every categry will apply t yu. Just pick the nes that d apply and