08 Tax Planning

08 Tax Planning - Prentice-Hall Inc Importance of Tax...

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Prentice-Hall, Inc. 1 Chapter 4 Tax Planning and Strategies Importance of Tax Planning • In 1913, the 16th Amendment gave Congress the right to impose the first income tax • The average American works more than 4 months just to pay his/hers taxes Income Tax Structure • __________-- progressive tax meaning that the more you earn the more you pay • __________ -- income ranges for which the same marginal tax rate applies – 10%-35% Income Tax Structure (cont’d) • __________ -- average amount of every dollar you earned that was paid for federal income taxes average amount of • _____________ -- average amount of every dollar you earned that paid for all local, state, and federal income taxes Paying Your Income Taxes • _____________ -- tax payment from each paycheck, determined on the basis of income and W-4 form • Quarterly estimated payments • Payments with the tax return (the dreaded April 15th) • Withholdings from stock, retirement funds, and prize or gambling winnings Social Security or Federal Insurance Contributions Act (FICA) • ________________ -- a mandatory insurance program administered by the federal government that provides support in the event of death, disability, health problems, or retirement. • Tax rate of 6.20% of gross salary up to $106,800 in 2009…there is NO social security taken out after this maximum.
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08 Tax Planning - Prentice-Hall Inc Importance of Tax...

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