FEDERAL INCOME TAX LESSON PLANS

ACCOUNTING I

INTRODUCTION TO FEDERAL INCOME TAXATION

LESSON PLAN DAY #1

Joel DeNamur

OBJECTIVES FOR THE CLASS PERIOD:

1)       Students should understand basic terminology related to federal income taxes.

2)       Students should understand what taxpayers' rights and responsibilities are.

3)       Students should understand what the consequences of noncompliance with tax laws are.

4)       Students should understand the importance of income taxes to our government and the economy.

5)       Students should understand what is all withheld off of their paychecks.

MATERIALS NEEDED:

1)       Transparency of a paystub (review)

2)       Transparency and handout of key terms

3)       Overhead projector

4)       Chalk and erasers

5)       Marker for transparencies

6)       Transparency and handout of piechart of govt. uses of tax money

7)       Transparency and handout of an IRS audit schedule

8)       Transparency and handout of taxpayer rights and responsibilities and consequences of not filing

9)       Handout of IRS quiz.

10)    Daily attendance sheet.

11)    Gradebook.

12)    Pen/pencils.

PROCEDURE: (50 minutes)

Welcome and Attendance - 3minutes

I will welcome students to the class and start off the class by taking attendance.                                                                          

Introduction of Tax Topic – 7 minutes

I will start off income taxation by asking the class how many of them work.  I will then ask them if they know what is all taken out of their paychecks.  I will explain what each of these withholdings are for (i.e. federal withholding, state withholding, SS tax, and medicare tax).  (Put up transparency of a sample W-2 to demonstrate what this looks like and what taxes are all taken out.

New Terms - 4 minutes

I will put up a transparency and handout tax terms that I expect the class to be familiar with.  We will go over them as a class and I will explain any of them that are unclear and let the class know that by the end of the unit they will know what all of them mean.

Why must we pay taxes – 5 minutes

I will ask the class if they know why we must pay taxes.  I will explain that is to pay for goods and services that we all use and I will then put up the transparency of a handout they have of a pie chart that details out what our government spends our tax dollars on.  Furthermore, I will explain that if we all don't do our parts and pay in income taxes then some of these programs and benefits will suffer.

Government Programs Activity  – 5 minutes

There is an activity to show students the importance of filing tax returns and paying income taxes.  The activity is detailed out on an IRS handout.  (the activity is the card game that was demonstrated to the class)

Discussion of IRS audits and consequences– 7 minutes

First I will ask the class who knows what it means to file a tax return.  The meaning is it is how we report to the government how much money we made for the year,  how many deductions from income we have, and finally whether or not we owe the IRS additional money or if they owe us money.

Secondly, I will explain that although filing is "voluntary" meaning it is the taxpayers' responsibility to declare all income and file a return.  There are many people who do not file tax returns or who do but try to hide money from the government.  This is illegal and the IRS does audits to check if people are being fraudulent or not.  I can put up the transparency of IRS audits and also table 2 which shows IRS examination results (found in the IRS binder of information).  I will have the class calculate %'s of returns audited and we can discuss which ones are more likely to be audited based on these %'s.

We will then discuss what the consequences of noncompliance are.  If you don't pay in the correct amount of taxes or are fraudulent in filing your taxes you are subject to:  (put up the transparency and refer to their handout )

1)       Paying interest and penalties on the amount of tax due back to the date you should've paid it.

2)       The IRS can garnish your wages.

3)       The IRS can seize your assets (cars, boats, etc.)

I will ask the class if they know the different ways to pay in taxes.  The two ways I will explain to them and write on the board are paying by withholding which the students do who work and by paying in estimated payments though out the year.  People who don't earn wages and don't have withholding do this.  I will then explain that not everyone has to file taxes.  If your income is below a certain level, the government allowed standard deduction can allow you to not file because your total tax will be zero.  This will make more sense later when we look at an actual return.  However, even if your tax is zero, you still must file if you want to get a refund of your withholding from your job!!!  This is a very important point.

Taxpayer Rights and Responsibilities - 7 minutes

We talked briefly that we all have a responsibility to file tax returns.  But what are the other responsibilities we have?  (Put up the transparency and refer to rights and responsibilities handout)

1)       To file a tax return.

2)       To obtain the needed forms and instructions to file that return.

3)       To file on time (generally April 15, unless it falls on a weekend)

4)       To attend any meetings with IRS examiners and bring paperwork to any audits.

However, we also have rights as taxpayers:

                1)    The right of privacy and confidentiality of tax information.  For example, the IRS can not disclose information about you to your neighbor.

2)     We have a right to appeal any IRS proposed adjustments to our taxes if we feel we are right.  We can appeal this within the IRS or in a tax court.

Ungraded IRS quiz and Discussion - 12 minutes

During the last 12 minutes of class I would like to hand out the attached IRS quiz to dispel any myths about the IRS that the class may or may not have heard.  I will explain if they have no idea on any question to just guess and give it their best shot.  It will be ungraded and just a fun activity.   I will give them about 5 or 6 minutes to complete it and then go over the answers with them .  (The quiz is also found in the IRS binder)

*If I finish early, I can star on my day 2 activities because there is a lot to cover and days 2 and 3 are very busy and crunched for time.

(Note) All of these activities on day 1 are meant to be discussions as opposed to lectures so the times may vary depending on the class.

Evaluation

After class I will self-reflect on how the class went and what I thought I could improve on.  Specifically, I will analyze how I planned my time and whether I had too much or not enough and whether or not the class seemed to be grasping the information or not.

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ACCOUNTING I

INTRODUCTION TO FEDERAL INCOME TAXATION

LESSON PLAN DAY #2

Joel DeNamur

OBJECTIVES FOR THE CLASS PERIOD:

6)       Students should understand basic terminology related to federal income taxes.

7)       Students should understand the purpose of the W-4 form.

8)       Students should understand what it means to file tax returns - who needs to file, which form, what information you need to file a return, and how to fill out a basic tax return.

MATERIALS NEEDED:

13)    Transparency of a paystub (review)

14)    Transparency and handout of key terms

15)    Overhead projector

16)    Chalk and erasers

17)    Marker for transparencies

18)    Transparency and handout of piechart of govt. uses of tax money (review)

19)   Transparency and handout of a W-4 form

20)    Transparency and handout of taxpayer rights and responsibilities and consequences of not filing (review)

21)    Transparency and handout of a W-2 and 1099int forms.

22)    Transparencies and handouts on "Do I need to file?" and "Which form should I file?"

23)    Transparency and handout of 1040EZ form with sample information filled in.

24)    Transparency and handout of a tax table.

25)    Homework problem handout and blank 1040EZ .  Handout of W-2 and 1099int for problem.

26)    Daily attendance sheet.

27)    Gradebook.

28)    Pen/pencils.

PROCEDURE: (50 minutes)

Welcome and Attendance - 3minutes

I will welcome students to the class and start off the class by taking attendance.                                                                          

Review of previous day – 7 minutes

I will start off by reviewing with the class what taxes are withheld off of paychecks.  I will put up the paystub transparency to review this point.  Then we will review why we must pay taxes and I will put up the transparency of the piechart and refer to the cardgame/activity we played yesterday.   We will review what can happen if you don't file your income taxes (interest and penalties, garnishment, and seizing assets).  Then we will review what taxpayer's rights and responsibilities are ( I will put up the transparency with these on it.)  Finally, we will briefly go over the terms from the previous day. 

New Terms - 4 minutes

I will put up a transparency and handout tax terms that I expect the class to be familiar with.  Not all of the terms will be covered in class or on the exam.  I have starred the important ones.  The other terms are just for personal reference.  We will go over them as a class and I will explain any of them that are unclear and let the class know that by the end of the unit they will know what all of them mean.

W-4's – 8 minutes

We previously discussed the different taxes withheld off of paychecks.  One of these was for federal income taxes.  Withholding is one of two ways we pay in taxes with paying quarterly estimated taxes being the other.  Most of us will only pay by withholding because we have jobs  but how does your company know how much to withhold off of your checks?  In the chapter on payroll we saw a W-4 form.  (put up transparency and refer to handout of W-4)  This is what you fill out when you go to work somewhere.  It determines how much you want withheld off of your paychecks.  For high school students you can usually either claim one or zero exemptions.   You can claim an exemption for yourself and anyone else who is financially dependent on you like a child.  You don't have to claim yourself for withholding however.  You can claim zero and then you will have more withheld off of your paychecks but will come out better when you file your return than if you had claimed one on your W-4.  Your employer will use this number, your single filing status, and your income to determine how much to withhold.  People with more complicated tax situations can fill out schedules on the back of the W-4 to more accurately determine how much to withhold and how many allowances to claim on the form.  That's about all the further I want to get into W-4's.  If you ever have  a question filling one out I or your employer can help you.  Just remember zero means more withholding, one means less.  

Filing a tax return  – 24 minutes

Explain there are 3 types of tax returns:  1040EZ, 1040A, 1040.  We will learn about the 1040EZ and the 1040A.  Write these on the board and stress the importance of remembering these 3.

(5 minutes) - Not everyone has to file.  Certain people with low income don’t have to.  Go over transparency of whether or not one must file a return. You still need to file even if there’s no tax if you want to get a refund.

(4 minutes) - For our examples we will need a W-2, a 1099int for interest income, the tax table.  Go over the different parts of a W-2 and 1099int (where to find information we need, etc.)  Also go over how to find the tax on the tax table.

(5 minutes) Go over how to determine which form to file.  Put up the transparency on which form to file and give hypothetical examples to the class for them to determine which form is appropriate.

(10 minutes)  Give the class a practice return to calculate.  Make the numbers very easy to use.   Using the W-2 and 1099int samples we can calculate a simple 1040EZ.  Go through step by step with the class what to do.   Be careful to explain how to determine the standard deduction amount on page 2 of the 1040EZ.   Give the class handout 3.12 for them to follow step by step in the future how to fill out a return.  It’s a great reference.

Homework – 3 minutes

With whatever time is remaining assign another tax return to do.  The assignment is attached.

Evaluation

After class I will self-reflect on how the class went and what I thought I could improve on.  Specifically, I will analyze how I planned my time and whether I had too much or not enough and whether or not the class seemed to be grasping the information or not.

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ACCOUNTING I

INTRODUCTION TO FEDERAL INCOME TAXATION

LESSON PLAN DAY #3

Joel DeNamur

OBJECTIVES FOR THE CLASS PERIOD:

9)       Students should know how to fill out a 1040A tax return.

10)    Students should know that they can electronically file a return or mail it in.

11)    To review for the exam on day 4.

MATERIALS NEEDED:

29)    Transparency of a W-4 (review)

30)    Transparency and handout of key terms (review)

31)    Overhead projector

32)    Chalk and erasers

33)    Marker for transparencies

34)    Transparency and handout of "Do I need to file?" and "Which form should I file?" (review)

35)    Transparency of a homework solution of 1040EZ form.

36)    Transparency and handout of a tax table.

37)    Transparency and handout of a W-2 and 1099int forms from day 2.

38)    Transparencies and handouts of 1040A with information filled in from the W-2 and 1099int.

39)    Transparency and handout of Schedule 1 for interest.

40)    Handout of sample problem for 1040A practice.  Include a W-2 and 1099int.

41)    Transparency of sample problem solution.

42)    A sheet with game questions on it for me for the review at the end of class.

43)    Daily attendance sheet.

44)    Gradebook.

45)    Pen/pencils.

PROCEDURE: (50 minutes)

Welcome and Attendance - 3minutes

I will welcome students to the class and start off the class by taking attendance.                                                                          

Review of previous day – 7 minutes

Go over the purpose of a W-4.

Review key terms.

There are 3 types of tax returns: 1040EZ, 1040A, & 1040.

Review the homework problem of the 1040EZ.

Filing a 1040A  - 7 minutes

Put up the transparency and review when to file a 1040A versus a 1040EZ.

Explain that a 1040A can be very easy to fill out, similar to a 1040EZ, there's just more information on the form for people who have complicated tax situations.  Go over a sample 1040A with the class using the same W-2 and 1099int form the previous day to show it has the same tax outcome.  This will reinforce to students that the tax outcome is the same, it's just the form that's a little longer.

Practice 1040A - 15 minutes

Handout the in-class homework assignment which is a 1040A practice problem with a W-2 and 1099int given.  Give the class about 10 minutes to complete it and then go over the solution with them and make sure they understand thoroughly how to fill it out.

Review activity for Exam  – 15 minutes

Break the class into 2 teams.  There will be one review question asked to each student.  If they answer correctly their team gets a point.  If they don't answer it correctly, the other team has a chance to answer it and steal their point.  Whichever team ends up with the most points on the review will be rewarded an extra 2 points on their test the next day.  The questions will be as follows:

1)       Name the 4 taxes withheld off of paychecks that we discussed. A- federal withholding, state withholding, Social Security, and Medicare taxes.

2)       What's the name of the form you fill out at your job to determine how many allowances to claim, which ultimately determines how much you will have withheld off of your paycheck? A - W-4

3)       Explain why we pay taxes. A- to fund government programs

4)       What does it mean to file your income taxes?  A- To fill out a tax return reporting all of your income and withholding and sending it in to the IRS.

5)       Name 2 of the 3 consequences of not paying taxes.  A - Pay interest and penalties, garnishment of wages, and seizure of assets.

6)       Name the other consequence.

7)       What responsibilities do we have as taxpayers?  A - (Name 2 of the 4) File a tax return, obtain necessary forms and instructions for that tax return, provide complete and accurate information on the return, and file on time (April 15).

8)       Name the 2 ways that you can pay taxes throughout the year.  A - Withholding and sending in quarterly estimated tax payments.

9)       Name the 3 types of tax returns.  A- 1040, 1040EZ, 1040A

10)    What information do we need off of a W-2 to file a return?  A - wages and withholding

11)    John makes 3500 at a job and 100 in interest income, does he have to file and why?  A - no, unless he had withholding and wants a refund.

12)    Sue makes 300 at a job and 800 in interest income, does she have to file and why?  A - Yes, her standard deduction will be 700 (the minimum) and her income is 1100.

13)    Jimmy is married and has 12 kids (dependents).  Should he file a 1040EZ or 1040A?  A - 1040A because you can't have dependents and file a 1040EZ.

14)    Marshall has a job and earns 1000 in wages and 500 in bank interest.  Which return should he file?  A - 1040A because interest income was over 400.

15)    Kurt is single and line 6 of his 1040EZ is 8250.  What is his tax?  A - $1241.

16)    Dre files married filing jointly and their line 6 is 1037.  What is their tax?  A - 171.

17)    Define unearned income.  A - Income other than for work performed.  Examples are interest and dividends.

18)    Define standard deduction.  A - An amount, provided by law and based on filing status, age, blindness, and dependency that taxpayers can deduct from their adjusted gross income before tax is determined.

If the class has more than 18 students in it, I will write up extra questions.

I will tell the class to review all of their handouts, specifically the material we went over in the game.  Anything we discussed will be fair game for the test.  They will be able to use their tax tables, "which form to file" sheet, and "do I have to file" sheet on the exam.

Evaluation

After class I will self-reflect on how the class went and what I thought I could improve on.  Specifically, I will analyze how I planned my time and whether I had too much or not enough and whether or not the class seemed to be grasping the information or not.

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ACCOUNTING I

INTRODUCTION TO FEDERAL INCOME TAXATION

LESSON PLAN DAY #4

Joel DeNamur

OBJECTIVES FOR THE CLASS PERIOD:

12)    Answer any last minute questions of students.

13)    Students will take exam.

MATERIALS NEEDED:

46)    Chalk and erasers

47)    Exams

48)    Gradebook

49)    Attendance Sheet

50)    Pen/pencils

51)    Extra calculators

PROCEDURE: (50 minutes)

Welcome and Attendance - 3minutes

I will welcome students to the class and start off the class by taking attendance.                                                                          

Ask for any last minute questions – 5 minutes

Ask the students if they have any last minutes questions before they take the exam.

Exam – 42 minutes

Handout the exams (attached) and tell the class to start reading the next chapter or work on homework from other classes if they finish early.  Absolutely no talking is permitted.  Their assignment for next time is to read the first section of the next chapter in the book.

Evaluation

After class I will self-reflect on how the class went and what I thought I could improve on.  Specifically, I will analyze how I planned my time and whether the class had too much time to take the exam or not enough.  Also, after grading the exam I will reflect on whether the students grasped the material or not and the difficulty level of the test (was it too hard, too easy, or just right).

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FEDERAL INCOME TAXATION

ACCOUNTING I

MR. DE NAMUR

EXAM

SECTION 1 – MATCHING (8 points)

Match the terms to the definitions on the right.  Some definitions will not be used and none of them will be used more than once.

1. form W-4                           ____                                      

2. dependent                         ____                                      

3. standard deduction                ____                                      

4. withholding                       ____                                      

5. tax liability                         ____                                      

6.credit                                   ____                                      

7.electronic filing                  ____                                      

8. voluntary compliance                ____                                      

A. An amount fixed by law and based on filing, status, age, blindness, and dependency that taxpayers may deduct from their adjusted gross income before tax is determined.

B.  A form on which taxpayers list specific sources of income or specific expenses for which they claim deductions or credits.

C. The amount of tax that must be paid.

D. This is used to help employers determine how much to withhold off employee’s paychecks

E. A system that relies on individual citizens to report their income freely and on their own, calculate their tax liability correctly, and file a tax return on time.

F. This allows taxpayers to file their taxes using a personal computer and tax preparation software.

G. Pay as you earn taxation.

H. A direct reduction of the tax owed.  Examples are for child care and higher education costs.

I. A part of a person’s total expenditures that can be deducted in determining taxable income.

J. A person who relies on someone else for support.                                                                                  

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Part 2 Miscellaneous Short Answer Questions (32 points)

9.        Name the four taxes that are withheld off of our paychecks discussed in class. (4 points)

10.     Name 2 consequences of not paying taxes or not filing a tax return when you are required to. (2 points)

If you name all of the consequences you will earn 1 extra credit point.

11.     What are 3 responsibilities we have as taxpayers?  (3 points)

If you name all 4 you will earn 1 extra credit point.

12.     Name the three types of federal tax returns (the forms).  (3 points)

13.     Steve makes 3000 at a job and 150 in interest income for the year.  His parents claim him as a dependent.  Does he have to file and why?  (Ignore the fact that we always want to file if we want a refund of our withheld taxes.) (5 points)

14.     Jane makes 250 at a job and 900 in  interest income for the year.  Her parents claim her as a dependent.  Does she have to file and why?

        (Ignore the fact that we always want to file if we want a refund of our withheld taxes.) (5 points)

15.     Line 6 of Jimmy's 1040EZ is 5,250.  Find Jimmy's tax.  (2.5 points)

16.     Line 6 of Rita and Joe's 1040EZ (married filing joint return) is 8,865.  Find their tax.  (2.5 points)

17.     Kurt is married and has 2 dependent children.  Which tax return (1040EZ or 1040A) should he file and why? (5 points)

18.     Fill out the attached 1040EZ given the following information.  Isaac is single and he doesn’t want to contribute $3 to the presidential election campaign.  His parent’s claim him as a dependent and he has no dependents of his own.  Sign the return with your own name and date it with today’s date.  All of the other information you need to fill out the return is on the attached W-2 and 1099int forms.  (30points)

19.     Fill out the attached 1040A given the following information.  Ray is single and he wants to contribute $3 to the presidential election campaign.  No one else can claim him as a dependent and he has no dependents of his own.  Sign the return with your own name and date it with today’s date.  All of the other information you need to fill out the return is on the attached W-2 and 1099int forms.  You will also need to fill out a schedule 1 for this return. (30 points)