life after americorps
Resource packet
March 2011
In this issue: Tax information & money tips
AmeriCorps National Civilian Community Corps
Pacific Region Campus
If you would like information about a specific job or school, or if you know of an opportunity that should be included in next month’s packet, please contact:
Amanda Enright, Program Office Support Team Leader: or 916-717-9989
Erin Blobaum, Assistant Program Director/ Training: or 916-640-0315
Table of Contents
Table of Contents...... / 2Taxes 101………………………………………………………………………………… / 3
Income Tax...... / 4
How to File...... / 5-7
Earned Income Credit…………………………………………………………………… / 8
Peer Review Form……………………………………………………………………..... / 8
Medical & Dental Expenses...... / 9
Educational Expenses...... / 10
12 Tips for College Students Filling...... / 11
Sample Support Team Leader Resume………………………………………………… / 12-13
Scholarships & Grants...... / 13
Hope Scholarship Tax Credit...... / 14
Tuition Tax Deduction...... / 15-16
Taxes & FAFSA...... / 16
Taxes & AmeriCorps Education Award………………………………………………. / 17
Online Links for Tax Information……………………………………………………… / 18-19
Common Mistakes People Make With Money………………………………………… / 20-22
Job Postings……………………………………………………………………………… / 23-36
Taxes 101: Five Basic Ideas
By William Perez
http://taxes.about.com/od/taxplanning/a/taxbasics.htm
Why do we have taxes at all?
The United States has a big budget. We have to pay for things like schools, roads, hospitals, the military, government employees, national parks, and so forth. The only way to pay for these things is for the government to get money from people and companies. People and companies pay a percentage of their income to the government. This is called the income tax. The government taxes our income so it can have enough money to pay for the things we all need. Congress and the President of the United States are responsible for writing and for approving the tax laws.
The Internal Revenue Service is responsible for enforcing the tax law, for collecting taxes, for processing tax returns, for issuing tax refunds, and for turning over the money collected to the US Treasury. The Treasury, in turn, is responsible for paying various government expenses. Congress and the President are also responsible for the federal budget. The budget is how much the government plans to spend on various programs and services. When the government spends more money, it must raise more money through taxes. When the government spends less money, it can afford to lower taxes.
Five Aspects of the Tax System
First of all, every person, organization, company, or non-profit is subject to the income tax. "Subject to income tax" means that people and organizations must report their income and calculate their tax. Some organizations are exempt from tax. But they still have to file a return, and the their tax-exempt status could be revoked if the organization fails to meet certain criteria.
Secondly, you are taxed on your income. That's the long and the short of it. Income is any money you earn because you worked for it or invested for it. Income includes wages, interest, dividends, profits on your investments, pensions you receive, and so forth. Income does not include gifts. You are not taxed on gifts you receive, such as inheritances and scholarships.
Thirdly, you must pay your taxes throughout the year. This is called "pay as you go." For most people, it means your income taxes are taken out of your paycheck and sent directly to the federal government. At the end of the year, you have paid in a certain amount of taxes. If you paid in more than what you owe, the government refunds the amount over what you owed. This is called a tax refund. If you haven't paid enough to cover what you owe, then you have a balance due. And you must pay this amount due by April 15th of the following year, or the government will charge you interest and penalties on the amount you haven't paid in.
Fourthly, the US tax system is progressive. That means that people who make more money have a higher tax rate, and people who make less money have a lower tax rate. Your tax rate will change depending on how much money you made that year. There is a debate over whether our tax rates should be progressive or flat. Politicians who support a flat tax argue that a single tax rate for everybody will greatly simplify people's lives. Politicians who support progressive tax rates argue that it is unfair to ask a person of modest income to pay the same percentage of their income as a wealthier person.
This idea of fairness is the motivation for all sorts of tax benefits. For example, you can reduce your total income if you contribute money to retirement account, such as a 401(k) or IRA plan. There are many other types of tax benefits. Tax benefits are how Congress rewards people for making certain types of decisions. The goal of tax planning is to choose which tax benefits make the most sense for you.
For more information on taxes and tax resources please visit http://taxes.about.com.
Income Tax 101
www.fairmark.com/begin/tax101.htm
This page provides a quick overview of the U.S. federal income tax. Here's a quick overview of the U.S. federal income tax:
Step 1: Total Income
Total income includes many kinds of receipts: wages, interest, dividends, business and partnership income, amounts you receive from IRAs and pension plans, alimony, lottery winnings — and the list goes on. Of special interest: it includes your profit from sales of assets such as stock or real property — in other words, capital gain. But some items aren't included. For example, total income doesn't include gifts you receive or life insurance proceeds.
Step 2: Deductions
Deductions come in four main flavors:
Business deductions
These deductions are claimed as part of the calculation of business income, so they're actually part of the determination of total income in Step One. But take note: deductions related to your investment activities are not considered business deductions.
Adjustments
These are deductions you're allowed to claim even if you don't claim itemized deductions (see below). Among the items here are your contributions to an IRA or Keogh plan, and alimony you paid. When you subtract your adjustments from total income, you arrive at an important number called adjusted gross income.
Itemized deductions; standard deduction
Each year you're allowed to claim itemized deductions or the standard deduction, whichever is larger. Itemized deductions include such items as medical expenses, state and local taxes, mortgage interest — and investment expenses. If those items don't add up to a large enough total, you claim the standard deduction instead. Your standard deduction depends on your filing status and is adjusted each year for inflation.
Exemptions
You're allowed a deduction just for being you: a personal exemption. You're also allowed an exemption for each person who qualifies as your dependent. Like the standard deduction, the exemption deduction is adjusted each year for inflation. When you've subtracted all of these deductions from your total income, the result is your taxable income.
Step 3: Apply the Tax Rates
Once you know your taxable income, you apply the tax rates to find out your tax Most people do this quite simply by looking up their taxable income in a table supplied with their tax form. If your income includes long-term capital gain you have to perform a special calculation to obtain the benefit of the lower rate that applies to this type of income.
Step 4: Subtract Payments and Credits
The tax law allows you to claim certain credits that reduce the amount of tax you owe. For example, if you pay for child care, a portion of that expense may be allowed as a credit. And of course, you get credit for any tax you've already paid — including income tax your employer withheld from your paycheck and any estimated tax payments you made during the year. Subtract your credits and payments from your tax to find out how much you owe. If your payments exceed the tax, you're in luck: you have a refund coming!
When, Where, and How to File
www.irs.gov/taxtopics/tc301.html
April 15 each year is the due date for filing your Federal individual income tax return, if your tax year ends December 31st. Your return is considered filed timely if the envelope is properly addressed and postmarked no later than April 15. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day (i.e., Tax Year 2006 is due April 17, 2007).
If you cannot file by the due date of your return, then you can request an extension of time to file. However, an extension of time to file is not an extension of time to pay. You will owe interest on any past–due tax and you may be subject to a late–payment penalty if payment is not made timely. To receive an automatic 6–month extension of time to file your return, you can file Form 4868 by the due date of your return. For more information, refer to the Form 4868 Instructions.
Be sure to use your social security number as it is appears on your social security card. If you have changed your name you should notify the Social Security Administration or call 1–800–772–1213 before you file your return.
If a joint return is filed, both husband and wife must sign the return
Be sure to attach the Form W-2 and the Form 1099-R that show Federal income tax withheld to the front of the return. If you are filing Form 1040, be sure to attach all related schedules and forms behind your return in order of the sequence number located in the upper right hand corner of the schedule or form.
If you owe tax, make your check or money order payable to the United States Treasury, and enclose it with your return. On the front of your check or money order, please show your name, address, social security number, daytime phone number, the tax year and type of form you are filing (for example, "2005 Form 1040"). Do not mail cash with your return. You can also use a credit card to pay the tax due by calling 1–800–2paytax (1–800–272–9829) or Link2Gov (1–800–729–1040). Refer to your form instructions for more information.
Mail your return to the address given in the tax form instructions for the area where you live. If possible, use the pre–addressed envelope that came with your booklet. If you are mailing payment or owe tax, follow additional instructions in your tax package.
You may want to file electronically! When you file electronically, you usually receive your refund within 3 weeks after the IRS has received your return, even faster if you have it directly deposited into your checking or savings account. Many professional tax return preparers offer electronic filing of tax returns in addition to their return preparation services. A fee may be charged. For more information on electronic filing, click on the e-file logo on the home page of www.irs.gov.
Dependents
www.irs.gov/taxtopics/tc354.html
Generally, you may claim a dependency exemption for a qualifying child or a qualifying relative. You may not claim a dependency exemption for an individual, however, if you are a dependent of another taxpayer. To claim a dependency exemption for a qualifying child or a qualifying relative, the citizen, national, or resident test and joint return test must be met.
To meet the citizen, national or resident test, an individual must be a citizen or national of the United States, a resident of the United States, or a resident of Canada or Mexico. An exception may apply for an adopted child who is not a citizen, national or resident of the United States.
To meet the joint return test, an individual generally must not have filed a joint return with the individual's spouse. An exception applies if the joint return is files as a claim for refund, neither the individual nor the individual's spouse is required to file a return, and no liability would have existed for either the individual or the individual's spouse if each had file a separate return.
You must include a valid social security number, individual tax payer identification number (ITIN), or adoption taxpayer identification number (ATIN) for each dependent claimed on your tax return or the exemption will be disallowed.
For more information on dependents, refer to www.irs.gov/taxtopics/tc354.html.
IRS FREE FILE PROGRAM
www.irs.gov/efile/article/0,,id=118986,00.html
The Free File program is a free federal tax preparation and electronic filing program for eligible taxpayers developed through a partnership between the Internal Revenue Service (IRS) and the Free File Alliance LLC, a group of private sector tax software companies. Since Free File’s debut in 2003, more than 15.4 million returns have been prepared and e-filed through the program. Free File allows taxpayers with an Adjusted Gross Income (AGI) of $52,000 or less in 2006 to e-file their federal tax returns for free. That means 70 percent of all taxpayers – 95 million taxpayers – can take advantage of the Free File program.
Some Important Changes for the Free File Program:
· Free File is a free service offered by companies for taxpayers with an Adjusted Gross Income (AGI) of $52,000 or less.
· Before selecting a company link, review the tax software company’s criteria to confirm that you meet their eligibility for preparing and e-filing your federal return for free.