When you get a job, you will have to fill out your first tax form (W-4 form). I am listing a website to better understand taxes in general below.
Why do we have to have taxes? Our federal, state and local governments provide many services to our community which are all paid by taxes. Medicare/Medicaid and medical research, public school funding and subsidized school lunches, defense funding, public roadways, police and fire protection, public libraries, job training and scientific research, bank regulation, food inspectors and Food and Drug Administration, air traffic controllers, unemployment benefits are all among the many things that are paid with tax dollars.
When you get a job, you will have to pay taxes. As a student, you will most likely not earn a lot as a part time worker and get most of your payroll taxes back when you file your taxes at the beginning of each new year. The process of filing your taxes with the IRS is something all adults have to do and groan about every year - hence the saying ‘Death and Taxes’.
Employees have to complete the form W-4. Employers use this form to determine how much income tax to withhold from the employee pay. In the form the employee has to declare his or her marital status, the number of withholding allowances, any additional amount the employee wants to withhold and any exemptions from withholding that the employee claims. Employers withhold payroll taxes and income tax from the employees’ pay. Employers send the amounts withheld to the federal government.
The gross pay is the whole amount an employee earns. The net pay or take home pay is the amount the employee gets after the taxes and any other deductions. The difference between gross pay and net pay are Social Security taxes, Medicare taxes, income tax withheld and other amounts withheld (for example, any employee benefits you might be paying for, such as health insurance).
Social Security taxes provide benefits for retired workers, the disabled and the dependents of both. The Medicare tax is used for medical benefits for certain individuals like retired workers when they reach age 65. Federal income taxes are used for national programs such as national defense, veterans and foreign affairs, social programs, law enforcement and community development. Here is an example from an IRS website:
Payroll Tax Rates
Social Security tax rate
Medicare tax rate
Total payroll taxes
*Employers also pay a matching 6.20% into social security*
If an employee earns $1,000, the payroll taxes are:
Social Security tax
Total payroll taxes
The employer deducts $76.50 from employee's pay which is sent to the federal government.
You have to file a tax return even as a student/teenager if your income in 2019 is:
- Your unearned income is over $1,100
- Your earned income is over $12,200 or
- Your earned and unearned income together total more than the larger of (1) $1,100 or (2) total earned income (up to $11,850) plus $350
Earned income is any income someone earns from working. Unearned income is income solely earned from investments.
Even if you do not meet the filing requirements as above, you should still file a tax return if you have had income tax withheld from your income or if you qualify for the earned income credit, additional child tax credit, health coverage tax credit, refundable credit for prior year minimum tax, first-time home buyer credit, adoption credit, or refundable American opportunity education credit. Look at the tax return instructions to see if you qualify for these credits. By filing a return, you can get a refund.
“Welcome to the Understanding Taxes Student Site.” Understanding Taxes - Student Site, apps.irs.gov/app/understandingTaxes/student/index.jsp
Tinaorem@gmail.com. “How to File Taxes: 7 Tips for Students and First-Time Filers.” NerdWallet, 30 Jan. 2020, www.nerdwallet.com/blog/taxes/expert-advice-students-filing-taxes/
Fishman, Stephen, and J.d. “When Does Your Child Have to File a Tax Return?” Www.nolo.com, Nolo, 7 Jan. 2016, www.nolo.com/legal-encyclopedia/when-does-your-child-have-file-tax-return.html