"Understanding Individual Income Taxes"Introduction
Students have learned that individual income tax is a tax
on people's earnings. The tax laws should be written so that
both the taxpayer and the tax collector can understand them.
This task is not always easy, but people seem more willing
to accept the necessity for taxes when they understand them.
Students will read further on why everyone needs to pay an income tax. Lesson Description
Students will use information from the Internal Revenue Service
Tax Interactive Web site to find out more about individual
income taxes. Previous Knowledge Expected
Students should be familiar with the following terms:
tax return: annual report filed with local, state,
or federal government detailing the income earned and taxes
owed
individual income tax: tax levied on the wages, salaries,
and other income of individuals Applied Content Standards (from the Council for Economic Education)
Standard 13: Income for most people is determined by
the market value of the productive resources they sell. What
workers earn depends, primarily, on the market value of what
they produce and how productive they are.
Standard 16: There is an economic role for government
to play in a market economy whenever the benefits of a government
policy outweigh its costs. Governments often provide for national
defense, address environmental concerns, define and protect
property rights, and attempt to make markets more competitive.
Most government policies redistribute income. Instructional Objectives
- Students will identify types and amounts of taxes that
are deducted from an individual's paycheck.
- Students will define the purpose of the Form W-4.
- Students will select and restate a tax term.
- Students will list goods and services paid for by tax dollars.
Student Web Activity Answers
- The taxpayer benefits because it helps them to save to pay taxes at the end of the year. The government benefits because they need continuous funding to keep from interrupting government services.
- Tax liability is the amount of tax that must be paid. Taxpayers meet (or pay) their federal income tax liability through withholding, estimated tax payments, and payments made with the tax forms they file with the government.
- Vertical equity is the concept that people in different income groups should pay different rates of taxes or different percentages of their incomes as taxes. "Unequals should be taxed unequally." Horizontal equity is the concept that people in the same income group should be taxed at the same rate. "Equals should be taxed equally."
- A tax deduction is an amount (often a personal or business expense) that reduces income subject to tax.
- Answers will vary.
Extending the Lesson
Encourage students to select the "Compliance & Enforcement" section and "Forms and Publications" of the Web site. Have students solve the Case of the Fair Tax.
Have students click on the Activities in the box on the righthand side of the page and complete Activities 1 and 2.
| 
