The Basics Of Taxes Answer Key
Mortgage escrow accounts: If you pay school taxes through a mortgage escrow account, you may want to contact the mortgage lender or its agent to advise them that you have switched to the STAR credit from the STAR exemption.
The Basics Of Taxes Answer Key
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This lesson will help students learn the basics of the Canadian income tax and benefit return, known as the tax return. This will help clarify the calculations done by certified tax software so students can better understand the final result of their taxes. Students will be able to test their knowledge through quizzes and practical examples.
Learning objective: Students will develop an understanding of the steps of the tax return. As a result, they will be better equipped to do their own taxes and to make sense of the calculations done by certified tax software.
Generally, the individual or company that pays you income will withhold tax at source, for example, your employer will deduct tax from your pay. The tax deducted over the course of the year helps cover the taxes you owe on your income at the end of the year.
Step 1: Explain to students that taxpayers in Canada do their taxes every year to calculate if they owe taxes (they have to pay the government) or if they are entitled to receive a tax refund (the government pays them).
Step 2: Ask students if they have ever done their own taxes or if they have seen their parents or legal guardians do theirs. For those who have, ask what they remember about the process. Give them a few moments to share their experience.
Step 3: Reassure students (particularly those who have had a negative experience, have been confused, or have had difficulties) that doing their taxes can be easy, especially once they understand the basic process.
Step 1: Inform students that the fastest and easiest way to do their taxes is electronically using certified tax software. There are many certified tax software they can choose from to do their taxes. Some of the software are free, and each is a bit different.
Explain to students that although they claim different deductions in Steps 3 and 4 of the tax return, all these deductions reduce their taxable income and, therefore, the tax they may owe on their income. Reducing the taxes they may owe could make them eligible for a refund or increase the amount of their refund.
Clarify that tax payable is calculated in two different steps of the tax return: federal tax in Step 5 and provincial or territorial tax in Step 6. If students choose to do their taxes using certified tax software, the software will complete these calculations automatically for them.
Review and complete the module exercise, a simplified version of an income tax and benefit return for Jonah Smith, with the students. Go over each step of the calculation with the class and discuss where and why these amounts are reported or claimed in the various steps. Emphasize the amounts shown are not actual tax brackets, tax rates or credit values. Have the students complete the exercise for Terry Lee have them compare their answers with each other. Review the answer key with the students.
The bulk of taxes collected in the US are taken through income tax withholding. Hired workers pay out of every check throughout the year, instead of paying their tax burden in one lump sum at the end of the year. Earners may also elect to not have taxes withheld, and opt to pay in a lump sum instead. Filing tax returns every year, taxpayers must establish that they paid enough, or if they overpaid, claim a refund. The IRS issues refund checks after tax returns are filed.
Tax credits are distinguished from deductions. Deductions reduce the total taxable income before taxes are calculated. Tax credits are subtracted from your total tax bill. Credits are typically preferable to deductions, even if the dollar amount of the deduction is higher than the tax credit.
For example, the median US income is around $42,000, a wage that carries a 25% tax rate. At 25% you might expect to pay $10,500 in taxes*. If you were given a $4,000 deduction, your taxable income would only be $38,000, so your 25% would total $9,500 or $1,000 less. So in this example a tax credit of $1,000 would be equivalent to a $4,000 tax deduction.
Another problem is sin taxes tend to disproportionately burden the poor. Taxes on activities like gambling and smoking impact the poor because they are more likely to gamble and smoke according to behavioral health studies.
In some very limited circumstances, a tax debt might be wiped out or discharged when you file for Chapter 7 bankruptcy. To answer questions on taxes and bankruptcy we recommend you contact a qualified attorney.
In many cases, failure to pay taxes will result in a tax lien being placed on property. That means the IRS has a legal claim on your property until you pay what you owe. A lien shows up on your credit report and will affect your ability to get loans or credit. It will make it difficult to sell or lease property, since the IRS typically has the priority claim on property they place a lien on.
In the United States, interest in an economy-wide carbon tax has been gradually growing. Debate often centers on how to use the revenue generated by a tax. One idea is to use the revenue to reduce taxes on productive activities, like payroll or corporate taxes. Other ideas include giving it back to all consumers, in the form of a carbon dividends, or using it to pay for infrastructure improvements. A 2017 study estimates a tax of $49 per metric ton of carbon dioxide could raise about $2.2 trillion in net revenues over 10 years from 2019 to 2028.
Charities generally do not pay state or federal income tax. They also may be exempt from paying state sales tax on their purchases and from local property tax on property they use to carry out their charitable activities. The extent and nature of exemptions from state taxes will vary from state to state. These generous exemptions recognize the important principle that organizations that act voluntarily to further the public good should be freed from the obligation to support government through the payment of taxes. Exemptions maximize the ability of charities to help others.
A 401(k) Plan is a defined contribution plan that is a cash or deferred arrangement. Employees can elect to defer receiving a portion of their salary which is instead contributed on their behalf, before taxes, to the 401(k) plan. Sometimes the employer may match these contributions. There is a dollar limit on the amount an employee may elect to defer each year. An employer must advise employees of any limits that may apply. Employees who participate in 401(k) plans assume responsibility for their retirement income by contributing part of their salary and, in many instances, by directing their own investments.
QDROs: The Division of Retirement Benefits through Qualified Domestic Relations Orders (PDF) - QDROs are domestic relations orders that recognize the existence of an alternate payee's right to receive benefits payable to a participant under a retirement plan. This publication provides questions and answers on QDROs.
Retirement and Health Care Coverage: Questions and Answers for Dislocated Workers (PDF) - Provides answers to commonly asked questions from dislocated workers about their retirement and health plan benefits.
Between 21 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the debtor files. Fed. R. Bankr. P. 2003(a). During this meeting, the trustee places the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plan.11 U.S.C. 343. If a husband and wife file a joint petition, they both must attend the creditors' meeting and answer questions. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the creditors' meeting. 11 U.S.C. 341(c). The parties typically resolve problems with the plan either during or shortly after the creditors' meeting. Generally, the debtor can avoid problems by making sure that the petition and plan are complete and accurate, and by consulting with the trustee prior to the meeting.
There are three types of claims: priority, secured, and unsecured. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding. (3) Secured claims are those for which the creditor has the right take back certain property (i.e., the collateral) if the debtor does not pay the underlying debt. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.
As a general rule, the discharge releases the debtor from all debts provided for by the plan or disallowed, with the exception of certain debts referenced in 11 U.S.C. 1328. Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage), debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a crime. To the extent that they are not fully paid under the chapter 13 plan, the debtor will still be responsible for these debts after the bankruptcy case has concluded. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for restitution or damages awarded in a civil case for willful or malicious actions by the debtor that cause personal injury or death to a person will be discharged unless a creditor timely files and prevails in an action to have such debts declared nondischargeable. 11 U.S.C. 1328, 523(c); Fed. R. Bankr. P. 4007(c).