Dollars & SenseW-4’s, W-2’s, and Tax Returns

Financial Planning

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What is a W-4?

Q&AOn what day of the year

are income tax returns due to the United States federal government (also known as “tax day”)?

April 15

Pay-as-you-go systemEach pay period, a portion of your check goes

toward your tax obligation

Jan. 1 April 15Dec. 30

Example:Results of Pay-As-You-Go

$10,000 Income

10% Tax Rate

$1,000 Amount Owed

REFUND OWE

$1,000 Amount owed

$1,000 Amount owed

$1,200 Amount paid

$900 Amount paid

$200 Refund $100 Payment

How does your employer know how much money to take out?Based on how you filled

out your W-4 form.

Purpose of W-4: determine how much federal income tax will be taken out of your paycheck each pay period.

W-4 Form: If not exempt…Fill out allowances worksheetAllowances: reduce your taxable income

($3,400)As a teenager, you must put zero allowancesThe less allowance you claim, the more $$

taken out

Allowances $ Taken Out (Taxes)

Net Pay Refund

Impact of Allowances

Your Income Allowances W-4 Impact Net Pay Est. Federal Tax Due Result$ Withheld

$20,000 0 $3,000 $17,000 $2,000 $1,000

$20,000 1 $2,500 $17,500 $2,000 $500

$20,000 2 $1,900 $18,100 $2,000 -$100

What is a W-2?

What do you need to complete your tax returns?Income

W-2 Form(s)1099 Form(s)Other tax deductible

statements

Tax forms or access to online forms

How do I complete a tax return?

How much will I owe?2010 Federal Income Tax Brackets

2009 Federal Income Tax Brackets

www.moneybluebook.com

Federal Tax ReturnFor a single person or married persons with no itemized deductions, complete Form 1040EZ

State Tax ReturnFor a single person or married persons with no itemized deductions, complete Form WI-Z

Practice 1040EZPrepare a 1040EZ federal tax return for Maria Hunt

using the information below. Maria is single and claims only herself.Maria M. Hunt / 54 Center Street / San Francisco, CA

96214-3627Social security number: 541-33-9892She wants $3 to go to the Presidential Election

Campaign fund.Maria’s salary is $28,200, plus she earned interest of

$155.No one else claims her as a dependent.Occupation: part-time engineerMaria had $3,660 in federal taxes withheld.

Practice WI-ZPrepare a WI-Z state tax return for Marta M. Hunt using

the information below. Marta is single and claims only herself as an exemption.Social security number: 383-65-3958Marta M. Hunt / 708 W. Milwaukee St./ Jefferson, WI 53549She wants $1 to go to the State Election Campaign fund.Tax district is the City of Jefferson, County of Jefferson,

School district number 2702.Maria’s salary is $44,978, plus she earned interest of $365.No one else claims her as a dependent.Marta paid $7,200 in rent. Heat was not included.Maria had $1,877 in state taxes withheld.

AssignmentComplete a 1040EZ and WI-Z tax return for

Sammy Dawson