Keeping Records and Paying Taxes

Organizing Your Financial Records

Financial records documents such as bank statements, motor vehicle titles, insurance papers, employment contracts, receipts, tax records, and bills containing the history of how someone’s money is spent

Filing Systems for Paper Documents

• Alphabetical • Numerical • Chronological

Online Safety

• Keep hard copy records • Do not give out personal or financial information• Never click on links in email messages that say you

need to update your financial or personal information at a particular website• Regularly update your operating system, firewalls,

and antivirus software• Read the privacy policy of companies before

clicking “I agree”

Money Management Software

• Can help you maintain accurate electronic records• Enable you to create graphs that chart your

income and spending

https://www.mint.com/

Paying Taxes

Taxes the money that people pay to their local, state, and federal governments to fund programs and public services

Federal taxes are used for Medicaid, Social Security, Education, the military, roads and public projects

State taxes fund public projects, unemployment insurance, education

Local taxes often go towards police, fire, schools, parks and community services

Types of taxes

Sales tax a tax that people pay when they make a purchase

Property tax a tax that owners pay on their land and property

Estate tax a tax collected when someone dies and passes wealth along to a family member or other heir

Income tax a tax figured as a percentage of someone’s earnings

http://www.irs.gov/pub/irs-pdf/i1040tt.pdf

Withholding the money that has been taken out to be taxes and other items such as health insurance and a pension plan

Social Security the federal program that people pay into while they are working, that pays disability, retirement, and life insurance benefits to eligible recipients

W4, 1040, and 1040EZ

W4 form tells your employer how much money to withhold from each paycheck

http://www.irs.gov/pub/irs-pdf/fw4.pdf

1040 or 1040EZ form the official government form used to report your income and your federal income tax

Adjusted gross income total income minus certain adjustments and reductions such as contributions to a retirement account, interest on as student loan, and exemptions claimed

Taxpayers can claim an exemption for themselves, as well as exemptions for their spouses and their dependents – usually children

Tax deductions expenses subtracted from adjusted gross income before figuring a person’s taxable income

Everyone gets a standard deduction of $6,100.

If you had a lot of tax deductions that totaled more than the standard deduction, you would be better off itemizing your deductions such as mortgage loan interest and property taxes

http://www.irs.gov/pub/irs-pdf/f1040ez.pdf

http://www.irs.gov/pub/irs-pdf/f1040.pdf

http://www.state.nj.us/treasury/taxation/pdf/current/1040.pdf

Filing an Income Tax Return

If you earn less than $10,000 and nobody can claim you as a dependent then you do not have to file a return, unless you had taxes withheld and might be eligible for a refund

If you are claimed as a dependent and you make more than $6,100 you need to file a return and if you’re late, the federal government will assess additional fees, penalties, and interest

W2 Form

An IRS document from an employer showing the total amount withheld from an employee’s paychecks throughout the year

http://www.irs.gov/pub/irs-pdf/fw2.pdf