Session 7: Taxes

For our final class, we planned on briefly discuss up the very last section, Taxes. Following that we were going to do a quick review of all the previous 6 classes. THEN - play [personal finance] games for the rest of the class period. I was pretty psyched. I spent ages preparing Personal Finance Taboo, Personal Finance Pictionary, Personal Finance and a pretty impressive homemade Personal Finance Jeopardy game to play in a classroom with no overhead projector.

Unfortunately the girls had a conflict and could only stay for about 15 minutes. It was a disappointing way to end the course as we were so looking forward to sending them off with a bang. Anyway, here is the summary for the information we covered (very quickly) taxes:

Session 7: Taxes – AKA Paying Uncle Sam

- Firstly, the reason we have taxes is to provide services to the American people. This includes the public education system, military, police, roads, parks, libraries, welfare, Social Security, Medicaid(a federally administered system of health insurance available to low income families), Medicare (a federally administered system of health insurance available to persons aged 65 and over). and much, MUCH more.

- Every American pitches in by paying taxes so we can benefit from these services. It would be awful if there was a fire, and the fire fighters demanded to be paid before they put out a fire…but the people didn’t have money.

- The amount that you owe depends on how much money you make. We have a progressive tax system which means that people who make more money pay more in taxes than those who earn less. (Someone start to draw the table below on the board)

- Before you start a job, you have to fill out a W4 form which identifies what you think your tax level should be. When you start working, you will notice that a small amount of tax will be automatically taken of each paycheck (instead of a huge amount coming out once a year). This is also called “withholding”. In the example below:

1. What is the Gross Pay?

2. What is the Net Pay?

3. How much has been taken out for taxes in total?

- Sales Tax: tax charged at the point of purchase for certain goods and services. In NYC 8.875%

- At the end of the year the IRS (Internal Revenue Service) calculates exactly how much tax you actually owe. If the total amount withheld from your paycheck during the year is more than the amount you actually owe at the end of the year, you get a tax refund. If the amount withheld is less than the total owed, you will need to pay when you file your taxes to make up the difference.

- For the 2009 tax year, children claimed as a dependent on their parents return had to file their own taxes if they met any of the following:

1) Earned income is greater than $5,700.

2) Self employment net earnings are greater than $400.

3) Earned and unearned total income is greater than the larger of $950 or earned income plus $300.

4) Unearned income (like dividends and interest) is greater than $950.

In case you were ever wondering: $1000 in federal tax dollars - where does it go?

The girls insisted that the federal government should take out a little from the military spending and improve the standard of public school lunches, because apparently "it nasty".