TAXES
HOW MUCH OF YOUR INCOME WILL YOU
KEEP?
PAYROLL TAXES
 The federal government receives the largest part of
its revenue from payroll taxes.
 Placed on income earned by individuals.
 Based on the individual’s total earnings and the tax
laws that apply to that type of income
 Paid to the government by individual emp0loyees
and their employers.
INCOME TAXES
 Taxes you pay on most types of income you receive.
 Range from 10-35% of taxable income
 YOU are responsible for calculating the amount of
federal income tax you owe.
FICA
 Federal Insurance Contributions Act
 The law that requires workers and their employers to
contribute to Social Security and Medicare.
WITHHOLDING
 Deducting money from your wages
 This $ goes to prepay your federal income and social
insurance taxes.
 Withholding enables the government to collect taxes
at a steady rate rather than all at the end of the year.
 This way you don’t face a huge tax bill at the end of
the year
GROSS INCOME
 The amount you earn before taxes are withheld.
NET INCOME
 Is the amount you receive after withholdings are
subtracted from your gross pay

GROSS INCOME – WITHHOLDINGS = NET INCOME
Form W-4
 The amount of income that you owe to the federal
government depends on several factors. (your gross
income, the number of people you support, and other
expenses that you pay.)
 When you are hired, your employer will ask you to
complete a W-4 which is required by law.
 Provides the information your employer needs to
determine the proper amount to withhold from your
paycheck.
INTERNAL REVENUE SERVICE
 Federal agency that collects income taxes
TAX RETURN
 a set of forms that taxpayers use to calculate their tax
obligation.
W-2
 A summary of your earnings and withholdings for
the year.
 When you file your tax return, you must enclose a
copy of your W-2.
1099-INT
 A statement of the interest your bank paid on your
savings that year.
 Just as employers do with a W-2, the bank sends a
copy of the Form 1099-INT to the IRS.
 Information from the W-2 and the 1099-INT is
enough for most young people to complete their
income tax returns.
1040-EZ
 YOU MUST MEET THE FOLLOWING CRITERIA:
 You are single or married and filing jointly with your spouse
 You have NO dependents (people you support financially)
 You and your spouse are under the age of 65
 Neither you nor your spouse is blind
 You have a taxable income of less than $100,000
 You earned no more than $1,500 in interest.
 You had no income other than wages, interest, tips,
scholarships, or unemployment compensation
Form 1040 & Form 1040 A
 When you are older, your financial life is likely to be
more complicated. You may own a home, have
children, invest in the stock market, or run a small
business.
 Then you may be required to use Form 1040A or
1040.
 This allows you to list or itemize your deductions.
Deductions
 Expenses that you can legally subtract from your
income before calculating your taxes.