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Taxes & Insurance Instruction

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Introduction to Economic Literacy Education Online
 
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Please read page 1. In this Economic Literacy Education program we don’t give tax advice! Instead we talk about the sources and uses of taxes.

Pages 2, 3 and 4 are informational pages. Please read them. On page 2 you learn who must file income taxes in Arkansas (practically everyone!). On pages 3 and 4 you get a short definition of the types of taxes.

Now begin the exercise that starts on page 5. These activities are similar to the budgeting activities you completed when you were doing our Budgeting unit. But this time you are working with two fictional households. One household is headed by Jim and Amber and the other household is headed by Glenda. So complete pages 5, 6, 7 and 8. You will need a small packet calculator and pencil.

Have you completed the exercises? Now do you see how some taxes, such as sales tax, are really more expensive for lower income households than they are for higher income households?

On pages 9, 10, 11 we have an activity on household financial management that demonstrates how financial decisions can help lower tax bills. Remember when we talked about Individual Retirement Accounts in the unit on Checking and Savings? In this exercise you will understand how depositing money into qualified savings plans, like IRAs or 401(k)s not only help you save money for retirement but lower your tax bill as well.


Pages 12 and 13 contain useful information for you as a taxpayer. Read these 2 pages and on page 12 you will learn Wages and Salaries That Can Be Taxes and on page 13 you will find helpful information when you are asking yourself if you Should Itemize When You File Your Taxes.

Pages 14 and 15 provide you with guidelines on determining who can be considered a dependent on your taxes. Page 16 lists the Revenue Offices on Northwest Arkansas.

Pages 17, 18 and 19 spell out the Taxpayer Bill of Rights. We downloaded this off the internet and you can check it out also at wysiwyg://www.state.ar.us/dfa/taxes/bor.html.

Insurance

Just like we don’t give tax advice, we don’t sell insurance. But we want you to know that you do need some types of insurance and not others. For example you need automobile insurance if you own a motor vehicle. It is probably required by law. However, you probably do not ever need credit life insurance. So read on.

Pages 1, 2, and 3 contain a very brief overview of automobile insurance. If you need or want more information call an insurance agent or go on-line and type in automobile insurance and begin your research.

Homeowners Insurance is another type of insurance your will probably have to buy. If a financial institution holds a mortgage on your house they will probably require you to have this insurance. Read about it on pages 4 and 5.

Health insurance is discussed on pages 6, 7 and 8. This type of insurance is usually provided through your place of employment and you pay all or a portion of this insurance premium through a deduction from your paycheck. Health insurance is a really confusing topic. Hopefully the information on these three pages will help but once again you may want to talk directly to a health insurance agent or go on-line to do some additional research for yourself.

Life insurance is covered on pages 9 and 10. There are several types of life insurance: term life, cash value life and credit life are three types. Here again, if you want more information contact a life insurance agent or go on-line to research products and see what they cover.

We have a word of caution about many types of life insurance. Maybe life insurance should be called death insurance because to get the benefit from many types of life insurance you have to be dead and the money goes not to you but to the beneficiary you name on your insurance policy. If you do not have dependents who would suffer financially if you should die, you do not need much life insurance. However, if you do have dependents you may need a great deal of life insurance. You should review your life insurance needs and life insurance coverage at least every 10 years.

The last two paragraphs on page 10 cover disability insurance. This pays a benefit, not if you die, but if you are disabled and cannot continue to work. You may need disability insurance even more than you need life insurance because your expenses will go on if you become disabled and not able to work.

Click here to download the handout for Taxes and Insurance