CSM 204 Chapter 4 LectureOutline of Previous LectureI. Planning for Successful Money ManagementII. Opportunity Cost and Money ManagementIII. Money Management ComponentsIV. Financial Records SystemV. Items to File at HomeVI. Items for a Safe Deposit BoxVII. Computer RecordsVIII. Record RetentionIX. 3 Components of Successful PlanningX. Balance Sheet or Statement of Net WorthXI. Income and Expense SheetXII. Important EquationsXIII. The Budgeting ProcessXIV. Characteristics of Successful BudgetingXV. Selecting a Budget SystemXVI. Identifying Savings GoalsXVII. Savings TechniquesXVIII. Quiz 1-3Outline of Current LectureI. Taxes and Financial PlanningII. Four Types of TaxesIII. Tax Information SourcesIV. Tax AssistanceV. What if your return is audited?VI. Tax Planning StrategiesVII. Quiz 1-4Current LectureChapter 4- Planning Your Tax StrategyTaxes and Financial PlanningAbout one-third of each dollar you earn goes to pay taxesThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.An effective tax strategy is vital for successful financial planningUnderstanding tax rules and regulations can help you reduce your tax liabilityFour Types of TaxesTaxes on PurchasesSales and excise taxTaxes on propertyReal estate property taxPersonal property taxTaxes on wealthFederal estate taxState inheritance taxesTaxes on earningsIncomeSocial Security taxesTax Information SourcesThe IRS has methods of assistancePublications and forms 1-800-TAX-FORMwww.irs.govRecorded messages 1-800-829-4477Phone hot line 1-800-829-1040Walk-in service at an IRS officeCD-ROMs the IRS sells that has forms and pubsTax publicationsThe internetTax preparation software companiesTax AssistanceElectronic filingFree File Alliance offers free tax preparation, e-filing for some taxpayersRefunds are generally received within three weeksTax preparers charge a fee for electronic filingTelefile is a way to file by phone if you are using form 1040EZTax preparation servicesRange from a one-person office to large firms such as H & R BlockGovernment-approved tax experts are called enrolled agentsAccountantsAttorneysIf your professional tax preparer makes a mistake, you are still responsible for the correct amount, plus interest and penaltiesWhat if your return is audited?About 1% of returns are auditedLarge or unusual deductions are red flagsLarge charitable deductionsAn extra child at the table (before SSNs were required)Home officesThere are three types of auditsCorrespondence for minor questionsOffice audit takes place at an IRS officeField is the most complex, with an IRS agent visiting you at home, business or your accountant’s officeYou have audit rights, including time to prepare for the audit, and clarificationTax Planning StrategiesDO Practice tax avoidanceLegitimate methods to reduce your tax obligation to your fair share but no moreFinancial decisions related to purchasing, investing, and retirement planning are the most heavily affected by tax lawsDON’T Practice Tax EvasionIllegally not paying all the taxes you owe, such as not reporting all incomeQuiz 1-41- True3- Wealth4- All of the above2- False2-