How I Explained Income Tax to a Middle School Girl

There are so many types of tax …. but the big one that I did last night and annually is the income tax.

Traditionally, we fill in the forms obtained from the libraries, post office, etc. With the advancement of technology, we can print these forms out along with the instructions from IRS.gov. And yeah, there are federal and state income tax – maybe a few big cities have them too. The paper method gets a bit messy because you have to read the instructions, do the math manually, and include all the documents (e.g. tax documents, receipts) that you’d mail a parcel to the IRS. The e-filing has made it so easy that almost all of these things are done for you. Imagine, I could have spend hours last night trying to figure the math and rulings only to find that my tax filing had been rejected – so have to go back to read the errors and rectify it, which is burdensome. With the e-method and e-filing, I fix it online and reclicked to submit.

For middle class like use, there are many companies that offer free federal filings for free as listed here. Note that you may need to pay for the state e-filing. I paid the $14.95 for the state filing and got the federal one free. We ended up getting some money back from the federal tax and paid $3. A purpose of taxes is to get redistribute the wealth so that the poorer will not lag behind too much wealth-wise.

When we purchase goods and service, we pay sales tax. I think NM’s is about 7.5 percent [5.125% to 8.6875% depending on the location of the business]. Normally, food is not tax because food is a necessity even for the poor.

When you eat yummy stuff (e.g. ice cream, apple), I tax you by having a (my size) bite or chunk out of them.

 

On Tue, Mar 29, 2011 at 8:42 AM, My other daugther wrote:
How do you do tax?!?!

2011/3/29  and I replied

I shoulda done the tax with you …. but I was afraid of a lightning quick boy who would come and press the keyboard and click the mouse.

2011/3/29 Nnn wrote

On 29 March 2011 07:17, I wrote:
…. Our tax e-filing got rejected.

Nnn’s last name with IRS and SS is “X Y” – no hyphen. Although in previous years, I hyphenated the name and it was fine.

Don’t worry, I just e-submit it again with the corrected info.

Tax Season is Here

Free tax filing assistance are available in your areas if your meet the criteria. Call 1-800-829-1040 for locations or via this University of Missouri website. Note: Last year, I noticed that some of the locations were incorrect and that there were more locations last year (so stay tune).

Make sure you bring all the required documents:

• Proof of identification
• Social Security Cards for you, your spouse and dependents and/or a Social Security Number verification letter issued by the Social Security Administration
• Birth dates for you, your spouse and dependents on the tax return
• Current year’s tax package if you received one
• Wage and earning statement(s) Form W-2, W-2G, 1099-R, from all employers
• Interest and dividend statements from banks (Forms 1099)
• A copy of last year’s federal and state returns if available
• Bank routing numbers and account numbers for Direct Deposit
• Total paid for daycare provider and the daycare provider’s tax identifying number (the provider’s Social Security Number or the provider’s business Employer Identification Number)
• To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms.

Tax Deadline

Have you done your taxes?

Do it now – you might be getting rebate. This is tax assistance info for Las Cruces, as laid out in the tax info bookmark:

Free Tax Assistance

IRS office: 505 S. Main, Las Cruces, NM 88001, 575- 327-7906 (Se habla Español)

Volunteer group: 525 East Lohman Ave, Suite A, 2nd floor, Las Cruces NM, 88001, 505-720-6675 (Llame por una cita)

Call IRS at 1-800-829-1040 for listings at your locality

Search: “EIC” in irs.gov

They’d do it for you if your household meet the criteria such as the income criterion and cases are not complicated.

***

From IRS:

¿Has oído hablar del Crédito por Ingreso del Trabajo? Es para personas y familias trabajadoras de bajos ingresos. Si calificas, podrías reducir tus impuestos, o hasta recibir un reembolso. Visita irs-punto-gov y haz clic en “Español” para ver si calificas. O llama al 1800-829-1040.

More Financial Responsibility for NM Youth

NM is known for being one of the poorest state in the nation. Financial capital is not the only resource for investment. I truly believe that non-financial capitals are underutilized until recently when the waves of credit crunch tsunami slammed on the US economy.

One of the areas in which NM may increase their revenues is via the maximization of tax rebate and credit revenues. This is especially true for the federal one since the tax returns tend to be larger. More importantly, this is the right of Americans and others who contribute to the US economy to pay their taxes or obtain their tax credits.

***** need citation *****

NM may increase its tax income by simply filing their tax. An effective manner, for those with relatively simple tax situation, is to have individuals fill and file their taxes online. While the computer literacy of adults in the US is not that great, this problem may be alleviated by having the youth to help out their parents in preparing taxes.

The explosion of high-tech devices among the youth is observed in the high use of computers and internet at school and libraries. Youths are mainly using internet for school work, social networking, and entertainment. An area in which the youth may be lacking is the use of internet for financial effective financial management. Besides tax issues, other potential areas related to technology and financial management are e-banking, e-bill payment, e-reminder, and coupons/discounts. With some training and assistance, the internet may be used as a boost to increase a household income by, for example, developing a website on family business on-line, advertising sales through craigslist, and getting involved in on-line works.

The purpose of this project is to educate the adults and youth on how the internet may help in a household’s financial managements. Adults need to be educated on computers so that they know about the potential benefits or hazards that the internet pose. People need to be informed that they are many scammers on-line who are exploring all avenues to make profit out of those who are well-versed in the internet world. Although children may not be familiar with some financial practices and jargons, their familiarity with the computers may compliment their parent’s knowledge. Children may be able to chat with an expert, call an expert, google the right phrases, and sense the reliability of a website based on its appearance (url address and design).

This preoject, in turn, is likely to push children to understand their financial conditions from various dimenstion. Children would likely know about the state of financial condition of the family. Parents and children would now talk about effective ways to improve a household’ financial conditions. With the knowledge on financial condition, it is hoped that children would be more frugal in their spending and more active in exploring other avenues to gain income. When children have a valid purchases, instead of merely asking parents for money, children of financial-challeged households may be motivated to prioritize their to-buy items, to save, and to work. The indirect effect of this is that children may talk more about healthy financial practices with their parents, their teachers, counsellors, and even their friends. In addition, having to work, may reduce their time spent in less healthy behaviors such as excessive video game playing and eating.

Ref

NM Dept of Revenue: https://ec3.state.nm.us/crs-net/logon.asp
NM Taxation and Revenue: http://www.tax.state.nm.us/trd_pubs.htm
IRS E-File Not for Everyone: http://www.wired.com/techbiz/media/news/2003/01/57274
GAO-02-205 Tax Administration: Electronic Filing’s Past and Future …
GAO-07-27 Highlights, TAX ADMINISTRATION: Most Filing Season …

Give Credits to Those who Deserve Them

The hot news nowadays is how a bailed out company, AIG, passed out a $165M bonuses to its executives from more than $170M bail out money to the company. Even in these bail out and economic hardship, the richer group is taking advantage of this economic debacle, getting richer out of this situation.

Let’s do our part by passing on the credits to those who deserve them. Tax season is coming to an end. The U.S. government has provided many tax credits as a way to transfer money to those who deserve them such as the low income, hard working groups. Imagine handing $4,000 cash to those in dire need of these money to survive (e.g. buying basic food, paying rent/mortgages). We can do this by spreading out the words on different types of tax credits.

In the past, NM was estimated to lose between $74 million and $136 million in Earned Income Tax Credit. And this is only one of the many tax credit programs such as the Child Tax Credit, Federal Housing Tax Credit (for first time home buyers), Credit for the Elderly or the Disabled, Economic Stimulus Payment (ESP), and Recovery Rebate Credit (for those who missed out on previous year’s ESP).

As one of the poorest states in the nation, NM certainly needs an economic boost via these tax credit programs. Together, we can inform others about this and encourage others to share this information to those who qualify for claim their money.

Note

• Free tax help are available. Call 1-800-829-1040 for listings at your locality (call them to get these addresses). Three main types: IRS office, Volunteer Income Tax Assistance (VITA) Program, and AARP.
• Some centers provide Spanish translation.
• Online tax filing and/or software use saves times. Free for lower income households. State filing may have a small fee.
• NM has state (above refers mainly to federal type) Earned Income Tax Credit.