house property income tax

welcome to basic income tax. this is accounting109. so this is basic income tax, and this is the introduction section, and i am lisacole, and i will be your instructor over the next 14 programs. we have 15 programs total,including this one. today what i would like to do is do an introduction, kind of introducemyself, go over the syllabus and what texts we're going to be using, kind of the formatof how the class will run, and then we're going to get a little bit in chapter 1. soi do want to cover some of that today. at this point, you should have received asyllabus from me. if you have not, it's in the mail, it's on the way. send me an e-mailand let me know. on the syllabus, it will have my e-mail, my telephone number, my office,and also my particular office hours for whatever

semester you're taking the class. the textthat we're going to be using is the income tax fundamentals, so you should make sureyou have the 2009 edition. if you're taking this in the spring of '09, or also if you'retaking it in the fall of '09, we'll be using the 2009 edition, so make sure you have thecorrect textbook. let's just kind of go over a little bit ofthe syllabus and what's on the syllabus. you'll have some course objectives. this is a basicincome tax class. and on campus i teach a federal income tax class in which we covermore material, so this is a one-credit basic income tax class. so we're going to be coveringthe basics. my goal is that when you complete this class, you should be able to do a basictax return, and we'll go over what that means.

basic versus one that's a little bit morecomplicated. so we want to make sure you understand theindividual tax model. we want to make sure you understand what is gross income and whatdeductions that you can take from gross income, and then we're going to look at how to calculatetax, how do we get to our tax. so we're going to look at the tax formula,we're going to look at tax tables, who can i claim on my tax return, exemptions. we'regoing to look at our schedule a deductions, you know, can i take my interest on my home.so we'll look at all those type of items, what's included in gross income, do i haveto include babysitting money if i babysit for someone. so we're going to look at allthose little details, what's included in our

gross income and then what can i take as adeduction. if i have to go on a trip or do something for my job as an employee, can itake that as a deduction? so we're going to be looking at those itemsand then, finally, how do i calculate tax, what tax credits, and then how do i pay tax,you know, how do i make my payment. so we'll be looking at those items. also in your syllabusyou should have the course requirements. you will have three multiple choice exams thatshould be in your packet that you received with my syllabus. you will also have to doa final tax return. that information is also in the packet. and then a couple of homeworkassignments, which will consist of multiple choice questions at the end of the chapter,which should also be in your packet. so your

packet is full of information. it's full ofthe syllabus, it's full of the outlines. as i lecture and go over materials, i'll be fillingout chapter outlines. you should have that. it should be full of powerpoints, the powerpointsthat i use from time to time, that's in your packet. and then also your exams are in yourpacket, along with your schedule of the programs that we'll be covering. so the withdrawalpolicy is in there, and then as i said before, the schedule that we'll be covering over thenext couple of programs is also in there, okay.make sure that if, as we go through, if you have questions or concerns or issues, thatyou send me an e-mail immediately so that i can address them. you also will have duedates. you should have due dates on your schedules

of when the first test is due, when do i needto turn in chapter 1 multiple choice questions, all that's in your packet and part of yoursyllabus. so make sure that you just take some time and go through that informationso that you'll understand what's due and when it's due, okay.i wanted to, like i said, introduce myself. i'm lisa cole. this is my seventh year atjohnson county community college teaching full-time. prior to teaching here full-time,i've taught at park university prior to this. also i was the ticket operations accountantfor the kansas city royals. i also worked for the internal revenue service as an auditor,and i also worked for arthur andersen, when there was an arthur andersen, in the tax division.so i've had a number of years of teaching

experience, along with a number of years oftax experience and other accounting experience, so just to give you a little background onmy history, okay. also with your textbook you should receiveinside the inside cover is a disc for tax cut. tax cut is h&r block's tax preparationsoftware. so that comes with the book, which is a great asset because you can load it onyour computer. it also comes with a state return. we do not have time in this classto go over the details of how to work through that software, but that software is for youto keep, and you are welcome when it's time to do your final tax return, you're welcometo do it using that software. so it is definitely a great asset, and so make sure you load thatand begin to explore it. you learn to use

it by just exploring it. it doesn't come withany specific instructions. you can get some instructions online. but just spend some timeworking through the forms and going through the process, okay.what we will cover in class is the preparation of the 2008 tax return. so everything thatwe cover is going to be related to your 2008 tax return, so everything that happened lastyear financially. okay. so that's all the introduction i have.i believe i covered the syllabus. you will be submitting your work to me via e-mail.you can mail it or you can bring it by my office, so you understand how to turn in assignmentsand when they're due. you know what textbook you should have, and at that point, i thinkwe've covered everything regarding the introduction.

so what i want to do is just get started andcover the first couple of pages of chapter 1. so if you have your book, and you should,let's begin to look at chapter 1. chapter 1 deals with just the introduction and theindividual income tax return, which is our main focus, is we're going to be looking atthe individual income tax return in this class. okay. it starts off talking about the historyand the purpose or the objectives of the tax system. the 16th amendment of the constitutionthat was signed or authorized on march 1st of 1913, they authorized the tax system, theincome tax, the ability to prepare a tax return in the united states to collect tax. so itwas 1913. so it's been a long time that we've been -- we've had a tax system. most believeit is just to pay for the benefits of the

government, but it's not. it's not just toraise revenue for government; it's also for social and economic policies.social meaning, for instance, a couple examples that they give you, and they give these toyou on page 1-2 in your book is the social part is that they give you a deduction formaking contributions. so if i make contributions to a charitable organization, i can get adeduction. so they are trying to encourage you to contribute so you can get a deduction.also, there's an earned income credit, which we'll briefly talk about, to where low income,people within certain ranges of income can get an additional credit, which is calledthe earned income credit, and it helps increase their refund. child and dependent care credit;if i pay for child care, then i can get a

credit for my child care, and so, therefore,encouraging people to pay for child care. so those are considered social reasons orsocial policies. the other could be economic policies. for instance, if i own a business,i can depreciate certain assets in my business and get a deduction for that. if i hire certainclasses or certain type of workers, i can get a credit perhaps for a workforce developmentcredit. there's different types of credit and things that their motive is to spur theeconomy. when -- if you look on page 1-2 under the new law alert, they talk about what happenedwhen we had katrina. that disaster caused congress to come up with a lot of creditsand deductions for economic purposes. you could get a credit to help the rebuildingprocess, a credit in the area of helping to

start new businesses or to encourage -- todevelop the workforce down there. so a lot of times when there are issues or economicissues, then it encourages different tax credits. so our tax law is not just to raise revenue.it also is there to encourage social and economic policies.okay. so let's look at section 1.2, reporting and your taxable entities, okay. we have fivetaxable entities, or entities that report directly to the internal revenue service.we have individuals, and that's us, and we're going to be looking at the 1040s as we dothat, and that's our main focus. but we also have our corporations. our corporations filetax returns, and they are 1120s. and they file tax returns with the internal revenueservice and they pay tax. so they pay tax

as an entity, the corporations do. partnershipsfile a return, they file a 1065, but they don't pay tax to the irs. partnerships filean information return, and then the partners take their share of their income and put iton their tax return and then, therefore, they, the partners, pay tax. so the partnershipitself is not a tax paying entity. and then also estates and trusts also file a tax return.so we have individuals, corporations, partnerships, and estates and trusts all that pay -- thatfile a tax return and pay directly to the irs. okay.and so on page 1. -- 1-5, the main section that i want to cover today is to look at yourtax formula. how does it get down to the point of when i do a tax return that i owe versusa refund? that's so important to people. i

do tax returns, i volunteer to do tax returns,and sometimes people don't understand, well, why do i owe, you know. or why didn't i geta refund? i got a refund last year. what makes up this formula that comes down to the factthat i get a refund versus owing at the end of the year? so we're going to look at thetax formula and look at what happens as we -- as individuals -- because that's our focusis looking at individuals this year. so what is the -- how does it get down to me owing,you know, what happens that makes me owe versus getting a refund. i would prefer to get arefund, okay. so the first thing we want to do is what happensas we work? as we work, we pay the irs in the form of withholdings, okay. so as youwork and you get paid, the irs withholds a

portion of your income and they keep it. theykeep it for tax purposes. and so the irs does not want me as an employee to say, oh, i'lljust wait and i'll pay you everything i owe you at the end of the year. they have a pay-as-you-goprogram. so that's withholdings. so when you get your paycheck, every time, you give alittle bit to the irs, along with the state, along with, if you live or work in kansascity, kansas city earnings. and so we know that. so that's what's happening, our federalwithholdings is going directly to the internal revenue service on our behalf. so as we work,we -- what we do is all our -- a portion of our income is withheld by the irs, withheldby our job, and they send it in to the irs. so then what we do at the end of the year,we say, okay, how much income did i make this

year? what is my gross income? and so, therefore,that is the starting point for our tax formula that is on page 1.5 and that we're going tolook at here. so i want to blow this up a little bit so you can see this.okay. so let's look at our tax formula. so, remember, we are at the point of gross income,and that's the starting point. and we will begin a chapter and look at our gross income.but that's our starting point. the basic for the irs says that all your income is consideredor included in your gross income. they want you to put it all in there, okay. that's ourstarting point. and then what they may allow you to do is have some deductions, okay. they'regoing to let you deduct some things or make some adjustments to your gross income, okay.and so gross income being the starting point,

then we have less what we call adjustmentsto income. okay. so we start off with our gross income and then we deduct from thatwhat we call our adjustments. we get to make some adjustments to our income and we'll lookat that. and that gets us to what we call our adjusted gross income.okay. so that gets us to our adjusted gross income, which we label as our agi. so thatwill get us to our adjusted gross income. so basically we have our gross income. theysay, okay, you can make a few adjustments, so we can reduce that gross income by someadjustments that they may give us, okay. and we get down to our adjusted gross income atthat point. okay. and so next we get to -- blow that up just a little bit more. okay. so nextwe get to have a deduction from our adjusted

gross income. we have what we call a standarddeduction. this deduction is a deduction given to you by the irs. and it's based on yourfiling status, which we will look at. it's the standard deduction. if i'm single it'sa certain amount, if i'm married filing jointly it's a certain amount, or if i'm head of household,and we'll look at all that in detail. and then we also have the possibility of takingwhat we call itemized deductions, taking what we call itemized deductions, and they appearon schedule a. you may hear them called schedule a deductions or people may say they fileda long form, okay. you hear that a lot, too. so what you do is you say, okay, these aremy itemized deductions and that's like your -- your charitable deductions, your medicaldeductions, your mortgage on your house, your

tax, personal property tax, and we'll lookat that. so you look at your itemized deductions and then you're going to compare it to thededuction that the government gives you, that the irs gives you, and you're going to takethe greater of these two, okay. so if my standard deduction is higher, then i'm going to takeit. but if the itemized deduction is higher, i'm going to take it. so you take the greaterof the two, and then you also subtract from that your exemptions. and this representsyou get a deduction for the individuals or the dependents that you claim on your taxreturn, you get a deduction for yourself, if you're married you get a deduction foryour spouse. if you claim children, you get a deduction for them. so those are consideredyour exemptions, okay. and that gets us to

our taxable income.okay. so as i said, we started off with our gross income, we've already took some adjustmentsout of it, and then we're going to take either the standard deduction from that or we'regoing to take our itemized deduction, and then they say, okay, you can take out a littlebit for your exemptions, okay. and then that gets you to your taxable income, okay. thatgets you to your taxable income. and that represents the amount of income that you earnedthat is taxable to you, meaning that i'm going to pay tax on. it's not the gross, it's notwhat you started off with, but it's after i get to take all these things out and i geta deduction for this. it gets down to, oh, this is what i owe in tax or this is the amountof my income that is going to be taxable to

me. so you get down to your taxable income,and then from that taxable income, you determine your tax, okay. so i'm at my taxable incomeand there's two ways in which i can determine what my tax is. i'm going to look at a taxrate schedule, okay, or i'm going to look at a tax table. and we will go over that indetail. one of the two i'm going to look at my taxable income number, let's say it's 10,000.i'm going to go to the tax table and say, okay, i'm single, my taxable income is 10,000,ah, this is my tax. then that represents the tax that i owe to the irs. that's going torepresent my tax. okay. then i take my tax number and then i get sometax credits from it. i mentioned a tax credit already, child care credit. that's a credit,it reduces my tax. some things are a deduction,

deducted from my taxable income. some thingsare a credit, it reduces my tax. okay. so i'm going to subtract that from my taxand then also on the flip side of it we could have some additional taxes. if i take moneyout of my retirement before i'm 69 and a half, i may have to pay an additional tax, okay.so you have tax credits that reduce our taxes and then we have additional taxes that increaseour taxes, okay. so then once we do that, that gets us down to our tax due, the actualamount that i owe the irs, okay. that gets me down to the actual amount that i owe irs.so let's say i've done all these calculations and i get down to my tax due was $5,000. mytax due was $5,000. so i owe the irs $5,000. okay. but don't forget about my jar here.remember, as i was working, i was paying the

irs, so they already have some of my money.so the question is, do i have $5,000 paid in? or do i not? okay. and that's going todetermine if i need to pay more to get to my $5,000 or if the irs owes me, okay. sothat jar that -- or that money that i've been paying into the irs, that represents whatwe call our withholding. and so that's what the irs already has. so i'm going to takemy $5,000 and then i'm going to deduct from that the withholding, okay, the amount thati've already paid in. also, i can deduct from that payments that i made directly to theirs, maybe not through withholding, but directly to the irs, and these are maybe quarterlyestimated payments that i may make, okay. and so a lot of times people do that, self-employedpeople who don't have an employer taking that

money out, they pay quarterly estimated payments,so every three months they make a payment into the irs to make sure that they have thatjar of money. so that jar of money either comes from your employer, through your paycheck,or if you're self-employed you're making it in directly to them. and then some of us,as employees we also can make estimated payments, if i don't think i'm going to have enoughpaid in, then because there's penalties, and we'll look at that for not having enough paidin, okay. and so i'm going to -- now i have my tax dueof 5,000. i look at my withholdings, and let's say that when i look at the withholding ihad $7,000 withheld or paid in. so, therefore, the irs owes me that $2,000 difference back.they don't get to keep it. i can tell them

to keep it and apply it to next year or ican ask for it as a refund. and so, therefore, that would be a refund. the flip side of itis that what if i had 5,000 that was due and i only had 4,000 paid in? therefore, i wouldowe $1,000, and that would be my -- considered my balance due.so that's how you get down to the fact of do i owe or do i get a refund. that's confusingto people. it's how much did i have paid in? how, you know, did i -- how many deductionsdid i get a chance to take? so we start off with our gross income, we get deductions,we get credits, we get down to taxable income, we figure out our tax, and then we comparethat to our withholding, our payments that we've paid in to the irs. so that representsyour tax formula that was covered on page

1-5 in your textbook, okay.and so i do want to stop there for our first session, but what you need to do is beginto read through chapter 1. at the end of chapter 1, the multiple choice questions are goingto be due, so i would advise you just to begin to read through those and as i go over chapter1 it will help you be prepared to answer those multiple choice questions.also, you already have your exam 1. and you can begin to read through those questions,and then as we cover chapter 1, you should be able to answer the questions on your examthat are based on chapter 1, okay. so the way our class will continue to go isthat i will cover the materials, i will do problems to help you understand it, i willtry to do illustrations to make it clear to

you how everything works, but the goal is,is that when you are completed with this class, you should be able to prepare a basic taxreturn, which will start with gross income. we will go over the adjustments to gross incometo get to your adjusted gross income. we use that number a lot. we will look at our itemizeddeductions. we will learn what the standard deductions are. and then we will go over whocan we take or claim on our tax return and which we can get an exemption for. we willlook at how to calculate tax using the tax rate schedules and the tax table. then wewill look at some tax credits. we will look at what may cause us to have some additionaltaxes. and we will briefly look at the payments, how do i make those quarterly payments andwithholding.

so we will be able to in this one-credit basicincome tax class -- keep in mind there's a federal income tax class that goes into rentaland some other depreciation and some other things that we don't cover in this class.so this is the end of program one and the introduction. look forward to the next sessionwhen we will be looking at who do we claim on our tax return, and the filing status,how do i file. can i file single? if i'm married do i file married filing jointly? if i'm notmarried but have any children, do i file single or do i have a head of household status? sowe will be covering those items in the next program.that's it. (music.)