Many students in high school or in college have part time jobs and learn the concept of gross pay and net pay. Their employers take out taxes at the federal and state level. This lesson takes a common situation and helps students understand how to complete the 1040EZ form to get all or most of the money deducted for federal income tax refunded.
- Complete a 1040EZ tax form using information from W-2 form.
- Explain what a W-2 form is and what it is used for.
- Define a taxable year.
When students receive a W-2 form from their employer after January 1, they may feel a bit anxious. The form could be the result of a summer job or from a current job.In this lesson, students are given a hypothetical situation where they have to file their first income tax form. This form is usually a 1040EZ form. The 1040EZ is used in most cases because student(s) (1) wages are low, (2) don’t itemize deductions, (3) usually do not have dependents, and (4) may or may not be claimed as a dependent on their parent’s tax return.
EconEdLink Lessons: These lessons can be used by teachers to provide a brief overview of federal budget, taxation, role of goverment, etc.
1040EZ Tax Form: Here is a current version of the 1040EZ tax form for income tax return for single and joint filers with no dependents, and official intstuctions.
1040EZ Tax Form
Tax Tables: Here is a current version of the 1040 tax tables.
1040 Tax Tables
Current tax form and tax table: Tax forms can change. If the form provided is not the current form they can be found at the following links.
Teacher Answer Key: Here are the correct amounts that should be entered on each line of the 1040EZ tax form.
Teacher Answer Key
How to Fill and File IRS From 1040-EZ: This article provides easy to follow step by step instructions on filling out the 1040 EZ form.
Understanding Your W-2 Form: An infographic detailing each box of the W-2 form. Great information.
Current W-2 Form and Instructions: Have copies made (page 2) for the students to allow them practice at filling in the information, and then transcribing the information needed to fill out the 1040EZ form. The link also shows how many copies of the employees W-2 is distributed.
For educators who wish to provide a brief overview of federal budget, taxation, role of government, etc., please refer to the following lessons:
Tell students that they have been sent a W-2 form from their employer. Explain that a W-2 statement is a statement of earnings over the past taxable year (Jan 1 through Dec 31). This is a form filed with the federal government detailing how much money you were paid last year, and how much money was deducted for federal income tax withholding. You are required to file your taxes with the IRS to determine if you are entitled to a refund or if you have to pay additional money for income tax. Tell students that their taxable wages for the previous year were $11,357. The tax with held was $1,248. In addition they earned $488 in interest from their savings account.
Students need to follow the instructions on both sides of the 1040EZ form to determine if they are entitled to a refund or if an additional tax payment is due. Guide the students through the form and answer any questions that may arise. The 1040EZ Tax Form will give students a step by step approach for accurately filling out the form and filing their taxes. If the form itself is not enough, students should read this article called "How to Fill Out a US 1040EZ Tax Return". This article provides easy to follow step by step instructions on filling out the 1040 EZ form.
Students should understand the relationship between the W-2 statement and the 1040EZ form. Students will need to complete "Worksheet for Line 5 - Dependents who checked one or both boxes" when they are done answering the questions. This is located on the second page of the Tax Form.
Refer to the teacher answer key and make sure students have the correct information filled in on their tax form at the end of class. Line 1 wages $11,357. Line 2, taxable interest is $488. Line 4 adjusted gross income is $11,845. Line 5 should have "you" checked and the amount is $5700 from the worksheet on the back. The worksheet on the back, line A is $1,1657, line C is $1,1657, lines D and E are $5700, line F is zero, and line G is $5700. Line 6 Taxable income is $6,145. Line 7, tax withheld is $1,248. Line 10 is $1,248. Line 11 is $613 from the tax table. Subtracting line 11 from line 10 shows a refund of $635.
After following the 1040Ez form students should be able to answer the following questions:
1. What are the important facts needed for filling out the form?
[Important facts needed for filling out the form is the income is $11,357, the interest on savings account is $488, and the file status is dependent on parent's tax return.]
2. What does it mean to be claimed as a dependent?
[To be claimed as a dependent means someone else (parents or guardian) are responsible for over 50% of their living expenses (food, clothing, housing, etc.)]
3. What is the difference between adjusted gross income and taxable income?
[Adjusted gross income is all the money earned during the taxable year. In this case, wages and interest on savings account. Taxable income is the portion of your income, after deductions, which is subject to tax. In this example, the adjusted gross income was $11,845 and the taxable income (the amount you look up on the tax table) was $6,145.]
Are students engaged? When circulating around the classroom during the lesson, are students asking questions. It is not unusual for there to be some frustration on their part, as this is a new activity for them. Tax preparation services can charge as much as $150 to prepare this form.
Going through the form at the end of class helps to give students a better understanding of the form and the income tax process.
EXTENSION ACTIVITYHow would the tax return change if the student could not be claimed as a dependent on their parent's tax return? Taxable income (Line 6) would change to $2,495. The tax (Line 11) would change to $249 and the refund (Line 12a) would change to $999.
“This activity was great for my Senior Economics class. It was challenging, but they worked hard to try to understand how to file taxes. A lot of students were glad they were learning how to do this now, rather than having to figure it out on their own later.”
“This lesson is so very necessary for my students! Filing taxes and understanding where the monies go is crucial to creating active citizens. Most of my students are disadvantaged and this sophisticated lesson makes them feel more empowered.”
“This lesson is so necessary for high school students because nowadays so many have part-time jobs after school. So, it will be beneficial if they know how to complete their own Income Tax papers because they can file their own taxes for free. As a result, having the skills and knowledge on income taxes can save them quite a bit of money.”
Review from EconEdReviews.org
“This seemed like a challenging, yet completely applicable lesson on completing an income tax form. Standard and collaborative classes may have some trouble doing the calculating but it will be great for them to know companies and individuals charge hundreds of dollars to complete tax forms. I often hear from students questions about taxation and how they have trouble completing the form on their own. It is indeed sad that they receive little to support at home when it comes to the completion of the income tax form. This seems like an excellent hands on and practical lesson. ”