Activity - Tax Season in the US

.pdf
Foundations in Personal Finance: Middle School Edition for Homeschool Chapter 3 Chapter 3: Lesson 2 Activity TEACHER'S MATERIAL Tax Season in the US 1/3 OBJECTIVE Students will be able explain the history, purpose, and enforcement of the income tax. STANDARDS Employment and Income Standard 3: Analyze factors that affect net income. Financial Decision Making Standard 1: Recognize the responsibilities associated with personal financial decisions. Financial Decision Making Standard 4: Make criterion-based financial decisions by systematically considering alternatives and consequences. PROCEDURE 1. Introduce the tax activity and review the key terms with your student(s). 2. Direct your student(s) to refer to the History of the Federal Income Tax information to help answers the questions. KEY TERMS Progressive Tax: A tax that takes a larger percentage of income from high-income groups than from low-income groups Voluntary Compliance: A system of compliance that relies on individual citizens to report their income freely and voluntarily, calculate their tax liability correctly, and file a tax return on time Tax Liability: The amount of money you are required to pay in income tax based on your earnings and deductions Internal Revenue Service: The federal agency that collects income taxes in the United States DIRECTIONS: Read the following information to help you answer the questions at the end of the activity. ACTIVITY Individual 30 MINUTES MATERIALS Activity handout; Internet access
Foundations in Personal Finance: Middle School Edition for Homeschool Chapter 3 HISTORY OF THE FEDERAL INCOME TAX Today, the months of January to April mark the annual tax season in America (The time in which you receive your W-2, the federal record of your gross pay and your tax payments, from your employer to the time taxes are due). But did you know that the federal income tax has not always been a part of the American taxation system? The financial requirements of the Civil War effort prompted the first American income tax in 1861. It was a progressive tax that was based on citizens' ability to pay. Only people above a certain income level were expected to pay. The government relied on voluntary compliance with the income tax. While some Americans complied, many did not. Less than 1 percent of all households actually paid the tax. The federal income tax was repealed in 1872. 1894-1895 Congress passed a new version of the federal income tax in 1894. It required people to pay a flat income tax rate of 2 percent. In 1895, the Supreme Court declared the income tax unconstitutional because it violated the part of the Constitution that requires any direct tax to be divided among the states according to population. EARLY 1900S By the turn of the twentieth century, the American economy had grown as a result of industrialization and modernization. The then progressive government supported more programs than ever before. With industrialization, a small section of the population became wealthy, but many remained poor. 1909-1913 In 1909, Congress proposed an income tax that would not be based on the population of the states. Ratification of the Sixteenth Amendment in 1913 made the income tax constitutional, which allowed the federal government to tax citizens' incomes directly. TODAY The federal income tax code is often criticized for being extremely complex and even unfair. Some Americans argue that the Sixteenth Amendment should be repealed. Agree with them or not, the federal income tax persists as a part of our collective reality. Chapter 3: Lesson 2 Activity TEACHER'S MATERIAL Tax Season in the US 2/3
Foundations in Personal Finance: Middle School Edition for Homeschool Chapter 3 Chapter 3: Lesson 2 Activity TEACHER'S MATERIAL Tax Season in the US 3/3 When it comes to managing your personal finances, you will need to familiarize yourself with tax forms such as the W-2, W-4, and 1040EZ. On a positive note, filing your taxes is relatively easy when you are a young adult with few assets and a small income. Once you start producing an income, you'll need to be sure to complete and submit your taxes on or before April 15. Source: http://apps.irs.gov/app/understandingTaxes/teacher/hows_mod01.jsp#Objectives What year did each of the following occur? 1. The first income tax is devised. 1861 2. The first income tax is repealed. 1872 3. The first income tax is declared unconstitutional. 1895 4. Congress proposes to make an income tax part of the Constitution. 1909 5. The Sixteenth Amendment is ratified. 1913 Research and answer the following income tax questions. 6. What event in history may have made the first federal income tax deemed necessary? Answer: The financial requirements of the Civil War effort prompted the first American income tax in 1861. 7. Who was president when the Sixteenth Amendment was ratified? Answer: Woodrow Wilson 8. What federal government agency collects income taxes? Answer: The Internal Revenue Service (IRS) 9. By what date must taxes be filed in the United States? Answer: April 15
Uploaded by DoctorFrogMaster930 on coursehero.com