Taxes - Basics

How to Read a Pay Stub?

Questions:

1.What is the difference
between gross pay and
net pay?

2.What is an example of a required deduction?

3.What are two examples
of Employer
Contributions?

Earned Income Vs. Unearned Income

Earned Income

-Work for this income - Must pay federal income tax (Social Security,
Medicare, etc.)

Unearned Income

-Income from gifts, capital gains, qualified dividends - Do not pay Federal
income tax but this income is calculated into your income tax return

Do I Need to File a Return?

1.

Dependents (You - child of parent)

Earned Income - More than $12,550

Unearned Income - More than $1,100

Gross Income - Total Income is more than $1,100

2.

Self - Employed Workers (Have own business - including part - time;
contract) - Earn more than $400 - Pay a different tax rate

3.

Household Employees (Employee - Your boss/employer pulls out your
taxes of your paycheck) - Earned more than standard deduction $12,550

​*If you have a job you should file taxes but this is who is required

Gross, Net, Taxable Income

Gross Income - what you earn/before taxes are taken out (contract worker, etc.)

Net Income - what you take home/ after taxes and deductions have been taken
out

Taxable Income - Gross Income then certain deductions are subtracted from
(AGI - adjusted gross income - this is used to calculate tax bracket/percentage)

Timeline of Filing Taxes

Start New Job - Fill out W4 Form - states how much taxes you want taken out of Paycheck

January - W2 Form will be sent to you from employer/boss or fill out 1099 (self employed) - states your
income from January - December from prior year

January - April 15th : File Income Taxes (usually through Turbotax or H&R Block) - may receive a refund
(paid too much in taxes) or a owe the IRS (did not pay enough taxes/ Tax Evasion)

*May have to file state taxes (Texas does not have state income taxes)

IRS Form W4

You will fill this out for every employer/
when you get a new job or multiple jobs

-Section three = edit if you want more
or less pulled out of paycheck - affect
your tax return = refund or owe status

Tax Forms - Before you Start Job

W4 - How much taxes to take out of your paycheck

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

Tax Forms - Before you Start Job

I-9 Employee Eligibility Verification

https://www.uscis.gov/sites/default/files/document/forms/i-9-paper-version.pdf

Tax Forms - January/File Taxes Every Year

W2 - You get from every job you worked in January every year

*States income and
taxes taken from your
paychecks

Tax Forms - January/File Taxes Every Year

1040 - Income Tax Form Return

*

If you file through

TurboTax or HRblock or
accountant - they fill out

the form for you

Tax Forms - January/File Taxes Every Year

1099 - File “other” income/ Did not get taxes taken out of paycheck

(contract)

Tax Forms - Comparison

Before you start a job

Every January - April (while you file taxes)

• W4

• I9

• W2

• 1040

• 1099

Basics Tax Return

1.

Gross Income

-Deductions

Adjusted Gross Income (AGI)

2. Adjusted Gross Income (AGI)

-Standard or Itemized Deductions (whichever is more)
Taxable Income

3.
Taxable Income x Tax Rate(based off table - how much you make) = Tax Liability

4.

Compare:
Tax Liability & Taxes Paid
-If you overpaid, you get a refund
-If you did not pay enough taxes
you owe