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Pre Class: Income Tax Activity You have likely heard or read news stories about tax brackets of 12%, 24%, or 37%. In this activity,
Pre Class: Income Tax Activity You have likely heard or read news stories about "tax brackets" of 12%, 24%, or 37%. In this activity, we investigate what these percentages mean and how they relate to federal income taxes. This activity considers only federal income tax, ignoring other taxes such as Social Security tax, Medicare tax, and state and local taxes. To keep things simple, we restrict our attention to an unmarried individual whose income sources are entirely wages, salaries, and tips, and who is not claimed as a dependent on anyone else's tax return. An example 1040 for 2019 should also have been provided and is mostly completed. Your instructor can walk you through some of the assumptions that were made in filling out the form, however, keep in mind that we are looking at the mathematics behind the calculation of these taxes. Meaning this is not a tax class, your instructor is not a tax specialist. If you have any questions or concerns about your taxes or filing your taxes, you should talk to a tax professional. For this example, let's assume this fictional person has an income of $25,000. To figure out the amount to be paid in taxes for this individual, we will need the 1040 instructions which can be found here: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf There's a lot of information and options on even this "1040" form because there are so many different situations that people fall in that can affect their taxes. However, for everyone, there is some total amount of income that they receive: Adjusted Gross Income (AGI), some amount of that income which is considered "taxable" Taxable Income, and some amount that they then have to pay in taxes: Tax. Let's record these pieces of information for our assumptions. Adjusted Gross Income (AGI) - Line 8b:
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