Topic 7: Paying Your Way

Topic 7: Topic 7: Paying Your WayPaying Your Way

Mrs. TobeMrs. Tobe

Topic 7.01: Topic 7.01: How do you use bank services?How do you use bank services?

Identify types of bank account documents that Identify types of bank account documents that are prepared on a regular basis.are prepared on a regular basis.

Explain the information that must be provided on Explain the information that must be provided on checks.checks.

Describe how to fill out checks correctly.Describe how to fill out checks correctly. Discuss the importance of legibility in filling out Discuss the importance of legibility in filling out

checks.checks. Explain how to fill out deposit/withdrawal slips Explain how to fill out deposit/withdrawal slips

correctly.correctly. Discuss how to place a stop payment on checks.Discuss how to place a stop payment on checks. Describe how to endorse checks.Describe how to endorse checks. Demonstrate procedures for preparing bank Demonstrate procedures for preparing bank

account documents.account documents.

Topic 7.02: Topic 7.02: How do you pay your bills?How do you pay your bills?

Identify frequently paid bills.Identify frequently paid bills.• Student loans, mortgage, cable bill, phone bill, utilities Student loans, mortgage, cable bill, phone bill, utilities

bill, credit cards, auto insurance, ect.bill, credit cards, auto insurance, ect. Explain information usually found on bills.Explain information usually found on bills.

• Account number, due date, amount due, name of Account number, due date, amount due, name of person on bill, list of fees/charges/expensesperson on bill, list of fees/charges/expenses

Discuss the importance of verifying expenses Discuss the importance of verifying expenses identified on bills.identified on bills.

• To make sure they are accurateTo make sure they are accurate• Catch identify theft earlyCatch identify theft early

Describe ways that bills can be paid Describe ways that bills can be paid • manually, electronically, direct withdrawal, etc.manually, electronically, direct withdrawal, etc.

Explain cautions to take when paying bills online.Explain cautions to take when paying bills online.• Some credit card companies, mortgage lenders Some credit card companies, mortgage lenders

and automobile financing companies change due and automobile financing companies change due dates. Check the due dates for such bills when dates. Check the due dates for such bills when they arrive.they arrive.

• Utility and phone companies are usually a little Utility and phone companies are usually a little more flexible and will wait for a few days before more flexible and will wait for a few days before they send you a reminder notice or charge you a they send you a reminder notice or charge you a late fee. Credit card companies, mortgage and late fee. Credit card companies, mortgage and automobile lenders, oil companies and landlords automobile lenders, oil companies and landlords are stricter.are stricter.

• Many banks allow you to arrange for automatic Many banks allow you to arrange for automatic bill payment from your checking account.bill payment from your checking account.


Consequences of being late

Debt Time when real trouble starts

Fallout

Mortgage 90 to 120 days late Foreclosure, loss of home

Auto loan One day late (although many

lenders wait 60 days)

Repossession, loss of car, potential for collection of

unpaid debt

Student loans 270 days late Wage garnishment, tax-refund seizure

Credit cards 180 days late Account "charged off," sent to collections

Collections accounts

Depends on amount, aggressiveness of

collector

Lawsuit, wage garnishment

Tax debt Depends on amount, aggressiveness of

collector

Wage garnishment, property or bank account

seizure

Child support Depends on amount, aggressiveness of

collector

Lawsuit, wage garnishment, jail

Procedures to pay billsProcedures to pay bills1.1. SET ASIDE A SPECIAL PLACE TO PUT YOUR BILLS WHEN THEY SET ASIDE A SPECIAL PLACE TO PUT YOUR BILLS WHEN THEY

ARRIVE, SUCH AS A DESK CUBBYHOLE, A SPECIAL SECTION IN A ARRIVE, SUCH AS A DESK CUBBYHOLE, A SPECIAL SECTION IN A DRAWER OR A BILL INBOX. AS SOON AS YOU RECEIVE THEM, DRAWER OR A BILL INBOX. AS SOON AS YOU RECEIVE THEM, OPEN YOUR BILLS, THEN PUT THEM IN THIS SPECIAL PLACE. OPEN YOUR BILLS, THEN PUT THEM IN THIS SPECIAL PLACE.

2.2. SET ASIDE TWO TIMES A MONTH, TWO WEEKS APART, TO PAY SET ASIDE TWO TIMES A MONTH, TWO WEEKS APART, TO PAY BILLS. THE MIDDLE AND END OF THE MONTH ARE GOOD TIMES.BILLS. THE MIDDLE AND END OF THE MONTH ARE GOOD TIMES.

3.3. CALL THE COMPANIES THAT SEND YOU BILLS AND HAVE THEM CALL THE COMPANIES THAT SEND YOU BILLS AND HAVE THEM REVISE YOUR PAYMENT DUE REVISE YOUR PAYMENT DUE DATESDATES TO CORRESPOND WITH ONE TO CORRESPOND WITH ONE OF THE TWO TIMES YOU PLAN TO PAY YOUR BILLS EACH OF THE TWO TIMES YOU PLAN TO PAY YOUR BILLS EACH MONTH.MONTH.

4.4. MARK YOUR CALENDAR TO REMIND YOU OF BILL-PAYING DATES MARK YOUR CALENDAR TO REMIND YOU OF BILL-PAYING DATES AND TO HELP YOU KEEP TO YOUR SCHEDULE.AND TO HELP YOU KEEP TO YOUR SCHEDULE.

5.5. PAY YOUR BILLS WITH CHECKS OR MONEY ORDERS, THEN NOTE PAY YOUR BILLS WITH CHECKS OR MONEY ORDERS, THEN NOTE THE CHECK NUMBER, THE THE CHECK NUMBER, THE DATEDATE AND THE AMOUNT PAID ON THE AND THE AMOUNT PAID ON THE RECEIPT PORTION OF EACH BILL.RECEIPT PORTION OF EACH BILL.

6.6. FILE THESE RECEIPTS AWAY AND KEEP THEM FOR SEVEN FILE THESE RECEIPTS AWAY AND KEEP THEM FOR SEVEN YEARS. YEARS.

7.7. PLACE THE ENVELOPES CONTAINING YOUR PAYMENTS NEXT TO PLACE THE ENVELOPES CONTAINING YOUR PAYMENTS NEXT TO YOUR KEYS SO THAT YOU WILL REMEMBER TO TAKE THEM YOUR KEYS SO THAT YOU WILL REMEMBER TO TAKE THEM WITH YOU AND MAIL THEM IMMEDIATELY.WITH YOU AND MAIL THEM IMMEDIATELY.


Describe types of errors that are found in billing statements.Describe types of errors that are found in billing statements.• A charge for something you didn't buy A charge for something you didn't buy • A charge for a purchase made by someone not authorized to use A charge for a purchase made by someone not authorized to use

your account. (Your responsibility for unauthorized charges is your account. (Your responsibility for unauthorized charges is limited to a maximum of $50.) limited to a maximum of $50.)

• A charge that is not properly identified on your bill A charge that is not properly identified on your bill • A charge for an amount different from the actual purchase price A charge for an amount different from the actual purchase price • A charge entered on a date different from the purchase date A charge entered on a date different from the purchase date • A charge for something that you did not accept when delivered A charge for something that you did not accept when delivered • A charge for something not delivered according to agreement. A charge for something not delivered according to agreement. • A bill with an error in the arithmetic A bill with an error in the arithmetic • A bill failing to show a payment, return, or other credit to your A bill failing to show a payment, return, or other credit to your

account. account. • A bill in which you were charged twice for the same item. A bill in which you were charged twice for the same item. • A bill mailed to the wrong address, when you've notified them of A bill mailed to the wrong address, when you've notified them of

an address change at least 20 days before the end of the billing an address change at least 20 days before the end of the billing period period

• A questionable item, or an item for which you need more A questionable item, or an item for which you need more information.information.

Topic 7.03: Topic 7.03: What do you do if the bill’s wrong?What do you do if the bill’s wrong?

Explain how to interact with a customer-service Explain how to interact with a customer-service representative to fix an incorrect billing representative to fix an incorrect billing statement.statement.1.1. LOOK AT YOUR BILLING STATEMENT EACH AND EVERY MONTH. LOOK AT YOUR BILLING STATEMENT EACH AND EVERY MONTH.

SLIDING IT INTO A DRAWER UNOPENED WILL END UP COSTING SLIDING IT INTO A DRAWER UNOPENED WILL END UP COSTING YOU MORE MONEY IN THE FUTURE. AFTER LOCATING YOUR YOU MORE MONEY IN THE FUTURE. AFTER LOCATING YOUR INCORRECT BILL CHARGE, HIGHLIGHT EACH INSTANCE THE INCORRECT BILL CHARGE, HIGHLIGHT EACH INSTANCE THE ERROR APPEARS. CALCULATE THE COSTS AND OBTAIN AN ERROR APPEARS. CALCULATE THE COSTS AND OBTAIN AN ACCURATE TOTAL. THINK ABOUT ANY CHANGES YOU MAY HAVE ACCURATE TOTAL. THINK ABOUT ANY CHANGES YOU MAY HAVE MADE TO YOUR ACCOUNT DURING THESE INSTANCES. MADE TO YOUR ACCOUNT DURING THESE INSTANCES.

2.2. SET ASIDE ENOUGH TIME FOR YOU TO SPEAK TO A SET ASIDE ENOUGH TIME FOR YOU TO SPEAK TO A REPRESENTATIVE WITHOUT FEELING RUSHED. YOU WILL NEVER REPRESENTATIVE WITHOUT FEELING RUSHED. YOU WILL NEVER BE ABLE TO PRESENT YOUR FACTS AND GET THE ISSUE BE ABLE TO PRESENT YOUR FACTS AND GET THE ISSUE RESOLVED IN ONE SECOND. MAKING SURE THAT YOU ARE ABLE RESOLVED IN ONE SECOND. MAKING SURE THAT YOU ARE ABLE TO HAVE ENOUGH TIME TO FOCUS ON WHAT THE TO HAVE ENOUGH TIME TO FOCUS ON WHAT THE REPRESENTATIVE IS TELLING YOU AND EXPLAINING YOUR REPRESENTATIVE IS TELLING YOU AND EXPLAINING YOUR SITUATION IS VITAL.SITUATION IS VITAL.


3.3. CALMLY PRESENT YOUR FACTS TO THE CUSTOMER SERVICE CALMLY PRESENT YOUR FACTS TO THE CUSTOMER SERVICE REPRESENTATIVE. ADVISE THEM OF ANY ISSUES THAT YOU REPRESENTATIVE. ADVISE THEM OF ANY ISSUES THAT YOU THINK MIGHT HAVE CONTRIBUTED TO THIS ERROR AND ASK THINK MIGHT HAVE CONTRIBUTED TO THIS ERROR AND ASK HOW IT CAN BE AVOIDED IN THE FUTURE. SPEAKING TO A HOW IT CAN BE AVOIDED IN THE FUTURE. SPEAKING TO A REPRESENTATIVE IN AN ANGRY TONE WILL CAUSE THEM TO BE REPRESENTATIVE IN AN ANGRY TONE WILL CAUSE THEM TO BE UNSYMPATHETIC TO YOUR ISSUE AND TUNE YOU OUT UNSYMPATHETIC TO YOUR ISSUE AND TUNE YOU OUT COMPLETELY.COMPLETELY.

4.4. NOTATE EVERYTHING THE REPRESENTATIVE IS TELLING YOU. NOTATE EVERYTHING THE REPRESENTATIVE IS TELLING YOU. FIND OUT HOW THEY ARE GOING TO RESOLVE YOUR ISSUE AND FIND OUT HOW THEY ARE GOING TO RESOLVE YOUR ISSUE AND HOW LONG WILL IT TAKE FOR YOU TO SEE THE END RESULT. HOW LONG WILL IT TAKE FOR YOU TO SEE THE END RESULT. ONCE THEY ARE ABLE TO INFORM YOU OF THE NECESSARY ONCE THEY ARE ABLE TO INFORM YOU OF THE NECESSARY CORRECTIONS, YOU WILL KNOW THAT THEY HAVE LISTENED TO CORRECTIONS, YOU WILL KNOW THAT THEY HAVE LISTENED TO YOUR ISSUE FULLY.YOUR ISSUE FULLY.

5.5. OBTAIN THE FULL NAME AND IDENTIFICATION NUMBER OF OBTAIN THE FULL NAME AND IDENTIFICATION NUMBER OF EVERY CUSTOMER SERVICE REPRESENTATIVE THAT YOU SPEAK EVERY CUSTOMER SERVICE REPRESENTATIVE THAT YOU SPEAK TO. LATER ON, IF YOU ARE STILL EXPERIENCING AN ISSUE THE TO. LATER ON, IF YOU ARE STILL EXPERIENCING AN ISSUE THE NEXT CUSTOMER SERVICE REPRESENTATIVE WILL BE ABLE TO NEXT CUSTOMER SERVICE REPRESENTATIVE WILL BE ABLE TO QUICKLY CHECK THE PREVIOUS STEPS. ALSO NOTATING THE QUICKLY CHECK THE PREVIOUS STEPS. ALSO NOTATING THE TIME AND TIME AND DATEDATE OF YOUR PREVIOUS CALLS CAN BE EXTREMELY OF YOUR PREVIOUS CALLS CAN BE EXTREMELY USEFUL.USEFUL.


Always calmly inform the customer Always calmly inform the customer service representative of your issue.service representative of your issue.

Review your bill statements and Review your bill statements and highlight errors.highlight errors.

Notate names or identification Notate names or identification numbers of every representative you numbers of every representative you speak to.speak to.

Never yell and become irate with the Never yell and become irate with the customer service representative.customer service representative.

Never rush through your issue Never rush through your issue without explaining it.without explaining it.


Describe information to include in a dispute letter Describe information to include in a dispute letter when resolving incorrect bills.when resolving incorrect bills.• Give you the name and address of credit reporting Give you the name and address of credit reporting

agencies and other persons to which the creditor has agencies and other persons to which the creditor has reported information about your account.reported information about your account.

• The creditor must report to them that you have The creditor must report to them that you have challenged your bill.challenged your bill.

• When the matter is settled, the creditor must report the When the matter is settled, the creditor must report the outcome to them.outcome to them.

• You may contact these credit reporting agencies to have You may contact these credit reporting agencies to have your side of the story added to your credit record. your side of the story added to your credit record.


Topic 7.04: Topic 7.04: What taxes do you pay?What taxes do you pay?

Tax liability-Tax liability- The total amount of tax that an The total amount of tax that an entity is legally obligated to pay to an authority entity is legally obligated to pay to an authority as the result of the occurrence of a taxable as the result of the occurrence of a taxable event. Tax liability can be calculated by event. Tax liability can be calculated by applying the appropriate tax rate to the taxable applying the appropriate tax rate to the taxable event's tax base. Taxable events include, but event's tax base. Taxable events include, but are not limited to, annual income, the sale of an are not limited to, annual income, the sale of an asset, a fiscal year-end or an inheritance. A tax asset, a fiscal year-end or an inheritance. A tax liability is a legal claim on assets. Should an liability is a legal claim on assets. Should an entity default on paying its taxes, the governing entity default on paying its taxes, the governing authority may foreclose on the delinquent authority may foreclose on the delinquent account, or take out a lien or encumbrance on account, or take out a lien or encumbrance on an asset. an asset.

Describe types of taxes Describe types of taxes • Income: Income taxes are those based on the amount of Income: Income taxes are those based on the amount of

income earned or received by members of society.income earned or received by members of society. The most common income tax is the The most common income tax is the personal income taxpersonal income tax

that comes due April 15th of each year. that comes due April 15th of each year. In principle, this is a tax on all income received. In practice, In principle, this is a tax on all income received. In practice,

a great deal of income is excluded. a great deal of income is excluded. Other types taxes are applied to specific types of income or Other types taxes are applied to specific types of income or

income-generating activities. income-generating activities. Two important examples are the Two important examples are the corporate profits taxcorporate profits tax, ,

placed on income or profit received by corporations, and placed on income or profit received by corporations, and the the Social Security taxSocial Security tax, placed on the wage earnings of , placed on the wage earnings of workers. workers.

Income taxes are the primary source of tax revenue at the Income taxes are the primary source of tax revenue at the federal level and is increasingly important for many state federal level and is increasingly important for many state governments.governments.


• Sales: A popular activity subject to taxation is Sales: A popular activity subject to taxation is the sale or exchange of commodities. the sale or exchange of commodities.

General sales taxes are those placed on the retail General sales taxes are those placed on the retail sales of almost all goods purchased within a state, sales of almost all goods purchased within a state, county, or city political jurisdiction. county, or city political jurisdiction.

In some cases, services or specific types of goods In some cases, services or specific types of goods (such as food or medicine) are excluded. (such as food or medicine) are excluded.

In other cases, the sales tax (often termed excise In other cases, the sales tax (often termed excise tax) is placed only on a specific commodity, such as tax) is placed only on a specific commodity, such as gasoline, alcohol, or tobacco. gasoline, alcohol, or tobacco.

Sales taxes are a major source of revenue for most Sales taxes are a major source of revenue for most state and local governments.state and local governments.


• Wealth: A number of taxes are placed Wealth: A number of taxes are placed on different types of wealth. on different types of wealth.

At the top of this list for most people are At the top of this list for most people are property taxes on homes and personal property taxes on homes and personal possessions. possessions.

Another type of wealth taxes is the Another type of wealth taxes is the inheritance taxinheritance tax levied on assets passed levied on assets passed along after death and the gift tax levied on along after death and the gift tax levied on assets passed only while still living. assets passed only while still living.

Property taxesProperty taxes are a key source of are a key source of revenue used by local governments to revenue used by local governments to finance education expenditures. finance education expenditures.


Identify levels of government that collect Identify levels of government that collect taxes taxes • FederalFederal• StateState• LocalLocal

Each level of government collect Each level of government collect taxestaxes to pay the to pay the people that are collecting that tax. people that are collecting that tax.

• For example, the state collects unemployment For example, the state collects unemployment taxtax to to pay the people that are collecting unemployment. pay the people that are collecting unemployment.

• The federal government collects tax for The federal government collects tax for social securitysocial security to pay the people that are collecting social security. to pay the people that are collecting social security.


Explain the purpose of taxes. Explain the purpose of taxes. • There are many services offered to citizens that could not be There are many services offered to citizens that could not be

managed effectively under any other system.managed effectively under any other system.• The federal government uses your tax dollars to support Social The federal government uses your tax dollars to support Social

Security, health care, national defense and social services such as Security, health care, national defense and social services such as food stamps and housing.food stamps and housing.

• Services provided by taxes in South Carolina are public schools, Services provided by taxes in South Carolina are public schools, safe highways, health care, prisons and social services for low-safe highways, health care, prisons and social services for low-income citizens. The city or county where you live provides water income citizens. The city or county where you live provides water and garbage service, police and fire protection and also and garbage service, police and fire protection and also contributes to public schools.contributes to public schools.

• We can all admit that these services are necessary. But why must We can all admit that these services are necessary. But why must they be paid for with taxes? Why shouldn't we just pay individually they be paid for with taxes? Why shouldn't we just pay individually for what we use? The answer is simple: Because no one could for what we use? The answer is simple: Because no one could afford it. Each person would have to pay the full fee for the service afford it. Each person would have to pay the full fee for the service regardless of their ability to pay. regardless of their ability to pay.

• Our tax system is based on our "ability to pay." The more money Our tax system is based on our "ability to pay." The more money we earn, the more taxes we pay. And the opposite is also true. If we earn, the more taxes we pay. And the opposite is also true. If we earn a small income, we pay less taxes. we earn a small income, we pay less taxes.


Discuss who is required to pay taxes.Discuss who is required to pay taxes.• Income for tax purposes includes money made Income for tax purposes includes money made

by working for an employer, self-employment by working for an employer, self-employment and tips, interest earned, excess retirement and tips, interest earned, excess retirement distributions and the sale of a home. distributions and the sale of a home.

• If an employee working for an employer made If an employee working for an employer made over the standard deduction plus the exemption over the standard deduction plus the exemption amount, then the employee must file taxes. amount, then the employee must file taxes. Single students who are being claimed by Single students who are being claimed by parents or guardians must file if their income parents or guardians must file if their income exceeds the standard deduction amount. exceeds the standard deduction amount.


Topic 7.05:Topic 7.05:How do you pay the government?How do you pay the government?

Adjusted gross income-Adjusted gross income- Income (including wages, Income (including wages, interest, capital gains, income from retirement accounts, interest, capital gains, income from retirement accounts, alimony paid to you) adjusted downward by specific alimony paid to you) adjusted downward by specific deductions (including contributions to deductible retirement deductions (including contributions to deductible retirement accounts, alimony paid accounts, alimony paid byby you); but you); but notnot including standard including standard and itemized deductions. and itemized deductions.

1040 EZ tax form1040 EZ tax form - Form 1040EZ is a simplified version of - Form 1040EZ is a simplified version of Form 1040 also called "Income Tax Return for Single and Form 1040 also called "Income Tax Return for Single and Joint Filers with No Dependents." If you make over Joint Filers with No Dependents." If you make over $100,000, you may not use Form 1040EZ. Form 1040EZ $100,000, you may not use Form 1040EZ. Form 1040EZ only allows you to take standardized deductions and does only allows you to take standardized deductions and does not permit you to take tax credits other than the Earned not permit you to take tax credits other than the Earned Income Tax Credit (EITC). Income Tax Credit (EITC).

1040 tax form-1040 tax form- Form 1040 is appropriate for all individual Form 1040 is appropriate for all individual U.S. tax payers. If you plan to itemize your deductions or U.S. tax payers. If you plan to itemize your deductions or have capital gains, you will need to use Form 1040. have capital gains, you will need to use Form 1040.

Taxable income-Taxable income- The amount of income subject The amount of income subject to income taxes; found by subtracting the to income taxes; found by subtracting the appropriate deductions (IRA contributions, appropriate deductions (IRA contributions, alimony payments, unreimbursed business alimony payments, unreimbursed business expenses, some capital losses, etc.) from expenses, some capital losses, etc.) from adjusted gross income adjusted gross income

Exemptions-Exemptions- A direct reduction taken from A direct reduction taken from taxable income for a specific reason, as allowed taxable income for a specific reason, as allowed by the IRS.by the IRS.

Deductions-Deductions- An expense subtracted from An expense subtracted from adjusted gross income when calculating taxable adjusted gross income when calculating taxable income, such as for state and local taxes paid, income, such as for state and local taxes paid, charitable gifts, and certain types of interest charitable gifts, and certain types of interest payments.payments.


Identify criteria for filing personal income tax forms.Identify criteria for filing personal income tax forms.• A copy of your tax return from last year A copy of your tax return from last year • The Social Security cards of you, your spouse and The Social Security cards of you, your spouse and

dependents, if applicable dependents, if applicable • W-2s from all employers W-2s from all employers • 1099 forms detailing dividends and interest paid to you. 1099 forms detailing dividends and interest paid to you. • Form 1099-G for any refund, credit or offset of state or Form 1099-G for any refund, credit or offset of state or

local taxes. local taxes. • All small business receipts. All small business receipts. • Other 1099 forms such as 1099-DIV, 1099-R Other 1099 forms such as 1099-DIV, 1099-R • Income statements from rental real estate, royalties, Income statements from rental real estate, royalties,

partnerships, S corporation, trusts partnerships, S corporation, trusts • Unemployment Compensation received. Unemployment Compensation received. • Social Security benefits received. Social Security benefits received. • Other Income Other Income


Describe the information contained on a W-2 Describe the information contained on a W-2 form.form.• You will need to report all wages you earned from your You will need to report all wages you earned from your

job or jobs during the year. Your employers are required job or jobs during the year. Your employers are required to provide you with Form W-2, Wage and Tax Statement. to provide you with Form W-2, Wage and Tax Statement. Form W-2 must be mailed out or hand-delivered to you Form W-2 must be mailed out or hand-delivered to you no later than January 31st. no later than January 31st.

• Gather all your W-2 statements from each job you Gather all your W-2 statements from each job you worked during the year. worked during the year.

• Look in Box 1 of the W-2. This is your total wages. Using Look in Box 1 of the W-2. This is your total wages. Using a calculator, add up the Box 1 amounts from every W2. a calculator, add up the Box 1 amounts from every W2.

• Put the total figure on Form 1040 Line 7, Form 1040A Put the total figure on Form 1040 Line 7, Form 1040A Line 7, or Form 1040EZ Line 1.Line 7, or Form 1040EZ Line 1.


Explain an employer’s responsibility for Explain an employer’s responsibility for providing employees with W-2 forms.providing employees with W-2 forms.• Each employer who withholds income tax, Each employer who withholds income tax,

social security tax, and Medicare tax from social security tax, and Medicare tax from employee earnings must furnish each employee earnings must furnish each employee with an annual report of these employee with an annual report of these withholdings. withholdings.

• The report shows total year’s earnings and the The report shows total year’s earnings and the amounts withheld for taxes for an employee. amounts withheld for taxes for an employee.

• The report is prepared on the Internal The report is prepared on the Internal Revenue Service From W-2.Revenue Service From W-2.

• Employers are required to furnish From W-2 to Employers are required to furnish From W-2 to each employee by January 31 of the next year.each employee by January 31 of the next year.


• Four copies (A to D) of the form are prepared Four copies (A to D) of the form are prepared for each employee. for each employee.

• Copies B and C are given to the employee.Copies B and C are given to the employee.• The employee attaches Copy B to a personal The employee attaches Copy B to a personal

federal income tax return and keeps Copy C for federal income tax return and keeps Copy C for personal record. The employer sends Copy A to personal record. The employer sends Copy A to the Social Security Administration and keeps the Social Security Administration and keeps Copy D for the business’s Records.Copy D for the business’s Records.

• Businesses in states with state income tax Businesses in states with state income tax must prepare additional copies of From W-2.must prepare additional copies of From W-2.

• The employee attaches the additional copy to The employee attaches the additional copy to the personal state income tax return.the personal state income tax return.


Identify forms of income that must Identify forms of income that must be reported on personal income tax be reported on personal income tax forms.forms.• Income From JobsIncome From Jobs

• Forms W-2 for all employers for whom • Forms W-2 for all employers for whom you and your spouse worked during the you and your spouse worked during the year year


Investment IncomeInvestment Income• Interest income - Form 1099-INT • Interest income - Form 1099-INT • Dividend income - Form 1099-DIV • Dividend income - Form 1099-DIV • Proceeds from the sale of stocks, bonds, etc. - Form 1099-B • Proceeds from the sale of stocks, bonds, etc. - Form 1099-B • Confirmation slips or brokers' statements for all stocks, etc. that you • Confirmation slips or brokers' statements for all stocks, etc. that you sold in the tax year. sold in the tax year. • Schedule(s) K-1 (Form 1065) from investments in partnerships • Schedule(s) K-1 (Form 1065) from investments in partnerships • Schedule(s) K-1 (Form 1120S) from investments in S Corporations • Schedule(s) K-1 (Form 1120S) from investments in S Corporations • Income from foreign investments - Amount of foreign taxes paid • Income from foreign investments - Amount of foreign taxes paid (you can find this on the brokers' statement):(you can find this on the brokers' statement):• Income from stock option exercises and sales:• Income from stock option exercises and sales: - Stock option agreement (showing type of options you received) - Stock option agreement (showing type of options you received) - Stock option statement showing exercise prices of options - Stock option statement showing exercise prices of options - Form 1099-B for proceeds from stock sale - Form 1099-B for proceeds from stock sale • Sale of employee stock purchase plan shares: • Sale of employee stock purchase plan shares: - Form 1099-B for proceeds from stock sale - Form 1099-B for proceeds from stock sale - Stock price on grant date: - Stock price on grant date: - Stock price on purchase date: - Stock price on purchase date: - If stock sale occurred before qualifying period begins, Form W-2 - If stock sale occurred before qualifying period begins, Form W-2 showing "compensation income" from a disqualifying dispositionshowing "compensation income" from a disqualifying disposition


Income from State & Local Income from State & Local Income Tax RefundsIncome Tax Refunds• Form 1099-G from state or local • Form 1099-G from state or local governments governments • State income tax return from the • State income tax return from the prior tax year prior tax year • City income tax return from the • City income tax return from the prior tax year, if anyprior tax year, if any


Alimony ReceivedAlimony Received• Bank statements or record of deposits• Bank statements or record of deposits

Business or Farming IncomeBusiness or Farming Income• Books/accounting records for your business, OR: • Books/accounting records for your business, OR: • Invoices or billings • Invoices or billings • Bank statements • Bank statements • Cancelled checks for expenses • Cancelled checks for expenses • Payroll records• Payroll recordsIn addition you need:In addition you need:• Invoices for major machinery, equipment, furniture, etc. • Invoices for major machinery, equipment, furniture, etc. purchases purchases • Logs or other records listing vehicle mileage • Logs or other records listing vehicle mileage • Inventory records, if your business maintains an inventory • Inventory records, if your business maintains an inventory of goods or materialsof goods or materials


If You Use Your Home For BusinessIf You Use Your Home For Business• Square footage of your home office area:• Square footage of your home office area:• Total square footage of your home:• Total square footage of your home:• Total rent paid, if home is rented:• Total rent paid, if home is rented:• Mortgage interest reported on Form 1098:• Mortgage interest reported on Form 1098:• Property tax payments from assessor's bill, • Property tax payments from assessor's bill, cancelled checks, or impound records:cancelled checks, or impound records:• Homeowner's insurance premium payments:• Homeowner's insurance premium payments:• Invoices for repairs and maintenance on your • Invoices for repairs and maintenance on your househouse• Utility bills • Utility bills


IRA/Pension DistributionsIRA/Pension Distributions• Form 1099-R for payments from IRA or • Form 1099-R for payments from IRA or retirement plans retirement plans • Account summary form for the year for • Account summary form for the year for your IRA accounts, or your IRA accounts, or • Deposit receipts and contribution • Deposit receipts and contribution records records • If you received a distribution from an IRA • If you received a distribution from an IRA account - the most-recently filed Form account - the most-recently filed Form 8606, if you made contributions in prior 8606, if you made contributions in prior years to IRAs that weren't deductible on years to IRAs that weren't deductible on your return your return


Rental Property IncomeRental Property Income• Profit and loss statements from your property • Profit and loss statements from your property manager, or manager, or • Checkbook or cancelled checks for expenses • Checkbook or cancelled checks for expenses • Form 1099-Misc or other records for rental • Form 1099-Misc or other records for rental income paid to you income paid to you • Mortgage interest reported on Form 1098 • Mortgage interest reported on Form 1098 • Property tax payments from assessor's bill, • Property tax payments from assessor's bill, cancelled checks, or impound records cancelled checks, or impound records • Record of suspended rental losses from prior • Record of suspended rental losses from prior years (usually shown on last year's return) years (usually shown on last year's return)


Unemployment IncomeUnemployment Income• Form 1099-G from your state • Form 1099-G from your state unemployment agency, or unemployment agency, or • Unemployment check stubs and • Unemployment check stubs and deposit records deposit records

Social Security BenefitsSocial Security Benefits• Form SSA-1099• Form SSA-1099


Income From Sales of PropertyIncome From Sales of PropertyIf the property was sold in the tax year:If the property was sold in the tax year:• Sales proceeds - Bill of sale, escrow statement, closing • Sales proceeds - Bill of sale, escrow statement, closing statement or other records statement or other records • Cost of the property you sold – Invoices, receipts, or • Cost of the property you sold – Invoices, receipts, or cancelled checks cancelled checks • Improvements made to the property – Invoices or • Improvements made to the property – Invoices or construction contracts and cancelled checks construction contracts and cancelled checks If the property was sold at a profit before the tax year on If the property was sold at a profit before the tax year on the installment basis:the installment basis:• Previous year’s return – Form 6252, Installment Sales • Previous year’s return – Form 6252, Installment Sales • Amount of principal collected on the installment note • Amount of principal collected on the installment note owed to you and the date you received each payment:owed to you and the date you received each payment:• Amount of interest collected on the note:• Amount of interest collected on the note:• Name, address and social security number of the buyer:• Name, address and social security number of the buyer:


Miscellaneous IncomeMiscellaneous Income• Jury duty pay records • Jury duty pay records • Form(s) W-2G for gambling and lottery winnings • Form(s) W-2G for gambling and lottery winnings

• Receipts for all gambling purchases • Receipts for all gambling purchases • Form 1099-MISC for prizes and awards you • Form 1099-MISC for prizes and awards you received received • Form 1099-MSA for distributions from medical • Form 1099-MSA for distributions from medical savings accounts savings accounts • Scholarship records (if you used the money for • Scholarship records (if you used the money for anything other than tuition, books, and supplies) anything other than tuition, books, and supplies) • Director’s fees receipts if you received money • Director’s fees receipts if you received money for serving on a corporate board of directorsfor serving on a corporate board of directors


Documents

Topic 7: Paying Your Way