Taxes are money paid by people to federal, state, and local governments. Taxes pay for services provided by the government. There are different types of taxes, such as income tax, sales tax, and property tax.
Income Tax: Income tax is paid to federal, most state, and some local governments. Taxable income is money that you get from wages, selfemployment, tips, and the sale of property. Most people pay income taxes by having money withheld from their paychecks. The amount of income tax you must pay depends on how much money you earn. Income tax rates are lower for people who make less money. Anyone who earns income, resides in the United States, and meets certain requirements needs to file a tax return and pay all taxes owed.
The Internal Revenue Service (IRS) is the federal agency that collects income tax. Taxpayers file Form 1040, U.S. Individual Income Tax Return, with the IRS each year. Your tax return tells the government how much you earned and how much in taxes was taken out of your paycheck. If you had too much taken out of your paycheck in taxes, you will receive a refund. If you did not have enough taken out of your paycheck in taxes, you will be required to pay the IRS.
Social Security and Medicare Taxes: These federal taxes are withheld from your paycheck. Social Security provides benefits for certain retired workers and their families, certain disabled workers and their families, and certain family members of deceased workers. Medicare taxes pay for medical services for most people over age 65. In most cases, you must work a total of 10 years (or 40 quarters) over the course of your life to receive Social Security retirement benefits and Medicare benefits. You may need fewer than 10 years of work to receive disability benefits or for your family to get survivors’ benefits based on your earnings.
Sales Taxes: Sales taxes are state and local taxes. These taxes are added to the cost of buying certain things. Sales taxes are based on the cost of the item. Revenue collected from sales taxes helps pay for state and local government services, such as roads, police, and fire departments.
Property Taxes: Property taxes are state and local taxes on your house and/or land. In most places, property taxes help support local public schools and other services.
How Government Works for Us
Taxes pay for the services the federal government provides to the people of the United States. Examples of these services are:
● Keeping our country safe and secure;
● Curing and preventing diseases through research;
● Educating children and adults;
● Building and maintaining our roads and highways;
● Providing medical services for low-income residents and the elderly; and
● Giving emergency help when natural disasters, such as hurricanes, floods, or earthquakes strike.
