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(Describer) Titles: Beginning Balance. How To Start Your Financial Future. Today we are discussing: taxes.
Our world is
rapidly changing.
With such a high
percentage of money
being tracked
electronically,
it is more important
now than ever before
to learn how to
keep track of it.
So, as a young adult
learning how to budget,
get your first savings account,
and file taxes,
what are the basics
you need to know?
Let's talk about taxes.
First off, what's a tax?
You likely pay sales tax
on nearly everything,
from shopping
to going to a concert
to adopting a new pet,
but those taxes are
paid for immediately,
and you don't have to
worry about them
when you file
for your income taxes.
The taxes you have to
file for on April 15th
are your Federal, State,
and Local income taxes.
If you're an employee,
your employer probably
withholds income tax
from your paycheck
and pays it
to the Internal Revenue Service,
otherwise known as the IRS.
However, if you're
self-employed
or a freelancer,
for example,
those who don't have
taxes withheld
will have quarterly
estimated payments.
So, do you know how much money
you will pay in income taxes?
This is called
your tax withholdings,
and it's calculated
using your filing status,
income, and deductions.
Let's break these terms down
to make it easier.
There are five
filing statuses,
and they determine the rate
at which your income is taxed.
The five statuses are:
single,
married filing joint,
married filing separately,
head of household,
and qualifying widow or widower
with dependent children.
All of these statuses
take different tax amounts
so that you are able to cover
your income tax come tax season.
If you pay too much,
you'll get a tax return,
and if enough
isn't withheld,
you will owe money
come tax season.
The next aspect
is income.
Income is defined
by the IRS
as money, property, or services
you receive in a tax year.
When filling out
your tax return,
you should receive a W-2
from your employer.
This is a form
that tells you
how much your employer paid you
over the course of a year,
which will help you
determine your gross income,
which just means the amount
of income you make
before taxes or other
deductions are taken out.
Your W-2 will also
include information
like the amount
of tips you made,
your tax withholdings
for Social Security,
Medicare taxes, savings,
and the amount of Federal
income tax you withheld.
The last area of income taxes
we are going to cover
is deductions.
A tax deduction is something
you put your money towards
that will lower the amount
of taxes you pay back.
Examples of deductions are
school supplies for teachers.
K-through-12 educators
can deduct up to $250
for materials they
purchase out of pocket
for their classrooms.
Another common deduction
is a charitable gift.
You can write off
a donation you make
to organizations
of your choosing,
but it doesn't have to
just be a monetary donation.
If you are self-employed,
you can also count
out-of-pocket expenses
such as supplies
for baked goods.
Just remember
to keep the receipt
in case of an audit.
And potentially one
of the most important deductions
to be aware of,
just graduating high school,
is the Lifetime
Learning Credit.
This credit provides
up to $2,000 per year,
taking off 20%
of the first $10,000
you spend for education
after high school.
So, let's review
everything we've learned.
A sales tax is something
you pay on nearly everything
and not the same
as your income tax,
which you file
a tax return for yearly,
and it's typically
on April 15th.
Income is defined
by the IRS
as money, property, or services
you receive in the tax year,
and before you receive
your paycheck,
your employer is likely
to have already withheld
your income taxes
from it.
This is money that you
will receive as a tax refund
if you owe less
than what was withheld.
And lastly, it's important
to know the ins and outs
of income taxes
before filing.
However, you don't
have to do your taxes alone,
and there are people
and software available
to make sure
you fill it out properly
and make sure you get
the most you can
out of your tax refund.
Head over to
wbgu.org/EducationalVideos
for more ways to improve
your financial literacy.
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(Describer) Beginning Balance. How To Start Your Financial Future.
(announcer)
This financial literacy video
was brought to you by a grant
from the Ohio Broadcast
Educational Media Commission
and WBGU PBS
in consultation with the Ohio
Department of Education.
For more videos in our
financial literacy series,
please go to wbgu.org.
(Describer) Accessibility provided by the US Department of Education.
Accessibility provided by the
U.S. Department of Education.
