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1399578021 Ecomomicshonorsfinalexamrevi Hellip Essay

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Economics Honors Final Exam Review Guide (2014)

Paying your Federal Income Taxes:
The federal agency that oversees the collection of federal income taxes is the Internal Revenue Service (IRS) Two basic ways you pay them
- Your employer withholds taxes from each of your paychecks and sends the withholdings to the IRS
- You file an Income Tax Return at the end of each calendar year
-- due to the IRS by April 15th of the following year
-- based mainly on the Wages and Tax info contained on the W-2 form provided to you by your employer (during January of the following year)
-- shows how much you owe for the tax year and how much your employer withheld during the year
--- if more was withheld than you owe, you’ll get a refund
--- if less was withheld than you owe, you’ll have to send a check with the difference to the IRS as part of your Income Tax Return

Non-voluntary payroll deductions include:
FICA Taxes
- Social Security (always 6.2% of gross pay)
- Medicare (always 1.45% of gross pay)
Federal Income Tax Withheld (FITW)
- Based on how many withholding allowances you claimed on the W-4 form you filled out for your employer
-- the employer will withhold a lower amount of taxes (FITW) for each allowance you claim
-- however, how much you owe in federal income taxes for the year has nothing to do with how many allowances you claimed on your W-4
- Employer uses charts in IRS Pub 15 to determine how much to withhold each paycheck

Federal Income Tax Brackets:
There are 7 tax brackets (10%, 15%, 25%, 28%, 33%, 35%, and a new one for 2013 – 39.6%) in the U.S. Tax Code We have a progressive tax system in which those that earn more money are expected to pay a larger percentage of their income for taxes as that income increases Other tax systems, that we do NOT use, include:

- proportional tax systems (aka flat tax): everyone pays the same percentage of their income (e.g. everyone pays 15% in taxes regardless...

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